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URL: http://www.bailii.org/scot/cases/ScotCS/2009/2009CSIH8.html
Cite as: 2009 SCLR 388, [2009] CSIH 8, 2009 SLT 305, [2009] ScotCS CSIH_8, 2009 Hous LR 18, 2009 GWD 7-125

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EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

Lord Eassie

Lord Hardie

Lord Marnoch

[2009] CSIH 8

XA159/07

OPINION OF THE COURT

delivered by LORD MARNOCH

In Appeal by the Pursuers

In causa

WILLIAM GRANT & SONS DISTILLERS LIMITED

Pursuers and Appellants:

against

ALEXANDER McCLYMONT (AP)

Defender and Respondent:

_______

Act: Cormack, solicitor advocate; McGrigors, LLP

Alt: Stalker, advocate; Shelter Scottish Housing Law Centre

17 February 2009

[1] In this case the pursuers, as successors in title to the South of Scotland Electricity Board, seek decree for recovery of possession of a dwelling house occupied by the defender known as Number 2 Cottage, Chapeldonan, Girvan. The basis of their doing so is that the defender occupies that house under a "short tenancy" within the meaning of Section 9 of the Rent (Scotland) Act 1984 - "the 1984 Act". This is disputed by the defender.

[2] The sheriff found for the defender and after procedure by way of Stated Case the Sheriff Principal adhered to the sheriff's interlocutor. The case now comes before us on appeal from the Sheriff Principal, he having certified that the cause is suitable for that purpose.

[3] The only point now in dispute between the parties is whether or not the tenancy agreement in question complies with the requirement of Section 9(1)(c) of the 1984 Act which reads as follows:-

"(c) the tenancy agreement does not contain any provision whereby the landlord may terminate the tenancy before the expiry of the said specified period (1-5 years) other than for non-payment of rent or for breach of any other obligation of the tenancy;".

[4] Clauses 1-11 inclusive of the tenancy agreement in question set out a number of customary provisions and then follow clauses 12 and 13 which are in the following terms:-

"12. The obligations hereby undertaken by you are undertaken jointly and severally and will be implemented to our reasonable satisfaction and the Board's Agents will be entitled as Landlords to look over the subjects let at any reasonable time or times.

13. If, in our opinion, you fail to implement any of the conditions of this Lease or fail to pay any monthly rent within fourteen days of it falling due (whether demanded or not) or if you should become notour bankrupt or be sequestrated or a poinding of any of your effects should be carried out or if you should sign a Trust Deed for [sic] behalf of your creditors then, and in any of these events, the Board shall be entitled forthwith to terminate this tenancy by notice in writing to you without prejudice to any claim the Board may have."

[5] It was agreed that the provisions in clause 13 regarding bankruptcy and the like constituted an irritancy and the sole question came to be whether these provisions could be regarded as an "obligation of the tenancy" within the meaning of the said Section 9(1)(c).

[6] Counsel for the defender and respondent argued strongly that, insofar as these provisions were distinct from the pactional provisions of the tenancy agreement, and bearing in mind, further, that an irritancy of this nature was incurred by the happening of an event rather than by any breach of a contractual or other obligation, the answer to that question was clearly in the negative. Moreover, if an irritancy of this nature were unexceptionable, the only remaining "evil" at which the clause could strike was a provision for a "break" in the lease and for that purpose Parliament would surely have spelt out its intention in quite different and clear language.

[7] Left to ourselves, we would have had little hesitation in giving effect to the foregoing submissions and we accordingly have much sympathy with the sheriff who was apparently invited to decide the matter without any reference to authority. However, as became clear before the Sheriff Principal, there is very persuasive authority in England to precisely the opposite effect. That authority, needless to say, formed the bulwark of the submissions made on behalf of the pursuers and appellants. There are two cases to be considered and we shall deal with each in turn.

[8] First, there is the decision of the Court of Appeal in Paterson v Aggio [1987] 19 H.L.R. 551. This was a decision of May L.J. and Bush J. concerning the very similar provisions of Section 52(1)(a) of the Housing Act 1980 which imposed as a condition of the English "shorthold tenancy" that:-

"(a) it cannot be brought to an end by the landlord before the expiry of the term, except in pursuance of a provision for re-entry or forfeiture for non-payment of rent or breach of any other obligation of the tenancy; ..."

[9] There, as in this case, the pactional provisions of the tenancy agreement were followed by a forfeiture clause in terms very similar to the irritancy clause before us. In the result, however, the Court appears to have accepted the submission that the obligations contained in a lease were synonymous with its terms and conditions which, in the view of the Court, were apt to cover the forfeiture clause. Put otherwise, it was suggested that the tenants could loosely be described as being "obliged" not to go bankrupt. By adopting a purposive construction of words which were said to be ambiguous the Court considered that they were giving effect to "the plain intent of the legislature". In doing so, it seems that they accepted the proposition that the object of the provisions in question was, indeed, to prevent landlords from having break clauses in their leases. By way of contrast, there was no reason, it was said, why Parliament should have intended to prevent landlords including "this very common form of (forfeiture) clause in their agreements."

[10] Counsel for the defender and respondent reminded us that, at least in 1987, the effects of an irritancy clause in Scotland were rather more draconian than those of a forfeiture clause in England but, despite this, and despite some different wording in Section 52(1)(a), we are satisfied that the ratio of the decision, which concerned that part of the clause which is identical with the wording with which we are concerned, is directly applicable to the present case. That said, for the reasons given above we might well have been persuaded, with all due deference and respect, to differ from the reasoning employed in Paterson were it not for the fact that that decision has been referred to with approval by the House of Lords in Cadogan Estates Ltd v McMahon [2001] 1 AC 378.

[11] In Cadogan Estates Ltd the question before the House was whether a forfeiture clause relating to bankruptcy constituted an "obligation" for the purposes of Case 1 of Schedule 15 to the Rent Act 1977. The arguments referred to above were deployed before the House but, by majority, a clause of forfeiture in the event of bankruptcy etc. was again held to fall within the meaning of the word "obligation". In reaching their decision the majority were clearly influenced by the consideration that the Rent Acts in general could not be interpreted in the same way as ordinary legislation but required a broad and commonsense approach. Using the language in a non-technical way Lord Hutton also considered there would be nothing unnatural in saying that the tenant under a lease was "obliged" not to become bankrupt if he wished to remain in possession of the house let to him. Most importantly, however, the majority went back to the Increase of Rent etc (Amendment) Act 1919 and the Increase of Rent and Mortgage Interest (Restrictions) Act 1920, both United Kingdom Statutes, in which, as it appeared to the majority, the phrases "the conditions of the tenancy" and "the obligations of the tenancy" were used interchangeably; the significance being that a breach of a condition in a lease had always been construed to include forfeiture for bankruptcy. In this connection, reliance was also placed on a dictum of Sir Raymond Evershed MR in RMR Housing Society Ltd v Combs [1951] 1 K.B. 486 at p. 493 where it was said that "no valid or useful distinction" could be made between the phrase "obligation of the tenancy" and the phrase "terms and conditions of the original contract of tenancy". Finally, Lord Bingham of Cornhill, Lord Hoffman and Lord Hutton all referred with apparent approval to the decision of the Court of Appeal in Paterson. For these, amongst other, reasons the majority felt constrained to find in favour of the landlord and again, despite differences in the statutory provision being considered, we are of opinion that the ratio of the decision, focusing, as it did, on the proper construction of the word "obligation" in the context of the Rent Acts, is directly applicable to the present case.

[12] In the result, and unlike the Sheriff Principal, we, in turn, feel constrained to follow the guidance given us by the majority of the House of Lords in Cadogan Estates Ltd. We feel that particularly bearing in mind that the reasoning of the majority depended, not least, on a construction of provisions contained in two early Rent Acts which applied throughout the United Kingdom.

[13] Before closing we should, perhaps, note for the record that counsel for the defender at one point sought to avoid the implications of the majority decision in Cadogan by submitting that in Scotland the concept of the short tenancy was a new, free-standing concept and that the statutory provisions respecting it should accordingly be construed as if untrammelled by the general approach to the interpretation of the Rent Acts referred in Cadogan and the earlier authorities relied on in that case.

[14] We are, however, unable to accept this submission. The provisions relating to short tenancies were first introduced in Part IV of the Tenant's Rights, Etc. (Scotland) Act 1980 and it is apparent from s.36 of that Act that, to use the phrase employed by the solicitor-advocate for the pursuers, the provisions in question were, in effect, "plugged in" to the Rent (Scotland) Act 1971. They thus form an integral part of the Rent Act legislation. In any event, as we have pointed out above, there is absolutely no difference in substance between the legislation considered in Paterson and that in issue in the present case.

[13] It follows from the above that this appeal must be allowed. We shall accordingly recall the interlocutors of the sheriff and Sheriff Principal and grant decree in favour of the pursuers for recovery of possession of the dwelling house in question.