Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION

[2015] CSOH 147

A512/00

OPINION OF LORD PHILIP

In the cause

BARONESS MIRANDA VAN LYNDEN

Pursuer;

against

COLIN GILCHRIST

Defender:

Pursuer:  MacGregor;  Gillespie MacAndrew LLP

Defender:  Duthie;  Drummond Miller LLP

5 November 2015

[1]        The pursuer is the heritable proprietor of Ballimore Estate, Otter Ferry, Argyll.  As such she is the heritable proprietor of the solum on which chalet no. 25 Ballimore Estate is built. 

[2]        By minute of lease dated 21 April and 1 May 1969 the then heritable proprietor of the estate granted a lease (“the head lease”) of a portion of the estate, including the solum on which chalet no. 25 was subsequently built, in favour of Loch Fyne Estates Limited (“Loch Fyne”), for the period of 31 years from 1 March 1969 to 1 March 2000.  Clause Ninth of the head lease provided:

“The Tenants shall erect within a period of five years from the commencement of this Lease not less than twenty houses and not more than forty houses on the subjects of let according to plans and specifications, on sites, and having such services as shall be approved in writing by the Proprietor.  The Tenants shall be entitled to sell houses to third Parties (who shall become their sub-tenants in respect of the solum of each house) as tenants’ improvements without granting title to the land upon which they stand.  Said houses shall be used only as holiday residences, and shall have no individual gardens….All buildings and works erected by the Tenants on the land shall be removed at the termination of this lease and the subjects of lease will be returned to the Proprietor in the condition in which they were received…”.

[3]        By a sub-lease dated 2 and 7 December 1970 (“the sub lease”) Loch Fyne sub-let to the defender’s father, the late William Gilchrist, the area of solum on which chalet no. 25 was subsequently built.  Clause Second of the sub-lease provided for an initial period of sub-lease of 6 years from 1 January 1971 to 31 December 1976, after which the sub-tenant had the option to renew the sub-lease for consecutive periods of 6 years.  The sub-lease was however to terminate on 1 March 2000 if Loch Fyne’s tenancy of the portion of Ballimore Estate had been then terminated.  The other relevant provisions of the lease were as follows:

[4]        By assignation dated 15 May 1982 Loch Fyne assigned their rights in the head lease and a number of sub-leases, including the sub-lease in favour Mr Gilchrist, to the pursuer and her husband Baron Willem Van Lynden.  Baron and Baroness Van Lynden thus became the head tenants and the mid landlords of the sub-tenant.

[5]        Subsequently, by assignation dated 16 June 1988, Baron and Baroness Van Lynden assigned the head lease, together with their whole rights as immediate landlords in the sub-leases previously assigned, to themselves as partners of and trustees for the firm of Ballimore Farms.  The firm of Ballimore Farms thus became head tenants and remained so until the termination of the head lease and the sub-lease on 1 March 2000. 

[6]        The defender’s mother was confirmed as executor of Mr Gilchrist’s estate on 12 May 1981, having been bequeathed his whole estate by his Will dated 24 September 1974.  The defender acquired the sub-tenant’s interest in the sub-lease by virtue of an assignation in his favour by Mrs Gilchrist’s executor dated 24 July 1997.

[7]        Since the termination of the head lease and the sub-lease the parties have been in dispute in relation to the ownership of the chalet.  The defender has intimated that he is entitled to remove it and that he intends to do so.  The pursuer contends that the chalet has acceded to Ballimore Estate and that she is the heritable proprietor of it.  She seeks declarator to that effect and interdict against the defender from dismantling or removing the chalet. 

[8]        Interim interdict was granted on 29 February 2000.  Thereafter the cause fell asleep and was reawakened in March 2014 after which the record was adjusted and a diet of debate was fixed.  That diet was discharged to enable the parties to enter into joint minutes of admissions as a result of which it was deemed unnecessary for any evidence to be led.  The matter came before me at a nominal diet of proof at which the parties were agreed that the case could be determined on the basis of submissions.  It was a matter of agreement that the chalet no. 25 had acceded to the heritable property owned by the pursuer by operation of law.

Submissions

[9]        On behalf of the pursuer Mr MacGregor argued that since Loch Fyne were not the heritable proprietors of the estate they had no right to grant a right of severance of the chalet in favour of Mr Gilchrist.  Accordingly it was not open to them to agree, as they purported to do in Clause Seventh of the sub-lease, that the chalet would remain the property of the sub-tenant.  If, contrary to that submission, any right of severance had been granted to the sub-tenant by Clause Fifteenth of the sub-lease, that right did not transmit to his successors or assignees.  For a provision in a lease to be binding on singular successors it had to be inter naturalia of the particular type of lease, Bisset v Magistrates of Aberdeen (1898) IF 87.  A right of severance was so divergent from the norm that it could not fall into that category.  There was no evidence that such a provision was commonly found in this type of lease.

The provision as to removal of buildings and restoration of the land in Clause Ninth of the head lease imposed an obligation on Loch Fyne.  It did not create any right.

[10]      While Clause Twelfth of the sub-lease provided that any assignee of the sub-tenant would be bound by the provisions of the sub-lease, no corresponding obligation was placed on the assignees of the head tenant.  In response to the defender’s argument that the pursuer must be deemed to have knowledge of the grant of a right of severance, Mr McGregor submitted that at all times the proprietorship of the heritage and the tenancy of the head lease had been in different hands.  In any event, a right of severance was not capable of being made real.

[11]      For the defender Mr Duthie invited me to hold that the two conclusions stood or fell together and that the conclusion for declarator should be dismissed as incompetent as it had no practical effect.  He argued that the defender had a right of severance of the chalet from the estate by virtue of Clause Fifteenth of the sub-lease.  There was nothing inherently objectionable in a provision in a lease which entitled the tenant to sever something which had acceded to the landlord’s heritage, Ferguson v Paul 1885 12R 1222, Shetland Islands Council v BP 1990 SLT 82 per Lord Cullen at page 94J.   Clause Fifteenth had to be construed in the context of the whole sub-lease along with the provisions of the head lease, and in particular Clause Ninth.  Clause Twelfth of the sub-lease provided that the obligations imposed in Clause Fifteenth should survive assignation of the sub-tenant’s interest.  Clause Seventh, which provided that the chalet should remain the property of the sub-tenant, could not prevent accession happening, but it indicated that the sub-tenant retained an economic interest in the chalet including the right of removal.  Clause Fifteenth was inter naturalia of the sub-lease.  Its provisions therefore transmitted against singular successors.  For that to be established it was not necessary to prove that similar provisions were commonly found in leases of this type, Optical Express (Gyle) Ltd v Marks and Spencer 2000 SLT 644 per Lord Macfadyen at page 650I.

[12]      Mr Duthie submitted that it was not open to the pursuer as landlord to repudiate the terms of the sub-lease to which she was now a party.  That would be inconsistent with her position as head tenant and mid-landlord, and inconsistent with Clause Ninth of the head lease, from which title was derived to grant the sub-lease.  Where a singular successor had acquired heritable property in the knowledge that there was in existence a personal obligation relating to the property capable of being converted into a real right, that personal obligation would be enforceable against him, Stodart v Dalzell 1876 4R 236.   In this case the right of severance was capable of being converted into a real right in the sense that severance of the chalet would give the defender a real right of ownership in the severed property. 

[13]      The pursuer was one of the trustees who granted the disposition of the estate in her own favour in 1991.  She must therefore be deemed to be aware of the terms of the head lease.  Following on the assignation of the lease by Loch Fyne to her and her husband on 15 May 1982 she must be deemed to have been aware of the terms of the sub-lease.  Accordingly she was bound by the provisions of the head lease and in particular the power to sub-let and sell under Clause Ninth which, along with the obligation to return the heritage free of buildings, had the effect of authorising the severance of the chalets.  In those circumstances Loch Fyne were entitled to grant a right of severance in the sub-lease.

Discussion

[14]      At the hearing before me some time was spent in argument in the examination of retention of title cases and in discussion as to whether a right of severance was inter naturalia of the sub-lease.  The case of Ferguson v Paul was briefly referred to, but little time was given to an analysis of the decision, my impression being, rightly or wrongly, that counsel found it difficult to reconcile with other lines of authority.  That case, of the cases cited, is the only one which dealt specifically with the creation of a right of severance of fixtures which had acceded to heritable estate and is in my view binding on me.  I therefore intend to examine the decision in some detail in order to understand more fully the approach taken by the court.

[15]      The case, which post-dated the decision in Brand’s Trustees v Brand’s Trustees (1876) 3 R(HL) 16, was a decision of the Second Division upholding a judgment of Lord McLaren.  The facts were that the tenant had taken a lease of a house and garden in Edinburgh for 5 years, extended to 15 years.  The lease was described as being in “the usual terms”, the only unusual clause being an obligation on the tenant to replace any fruit trees which he removed in the course of the lease with trees of equal quality and value.  After he took entry he removed several fruit trees in order to erect extensive greenhouses, “solidly attached to the ground by stone or brick foundations”.  The tenant averred that the greenhouses were not ordinary adjuncts to the dwellinghouse, but covered nearly the entire garden ground, and were erected with a view to the cultivation of flowers and shrubs for exhibition at national and international shows, and were of no use to anyone except for the special purpose for which they were erected.  These activities were not carried on as a trade but as a hobby, the tenant being described by Lord McLaren as an “amateur florist”.

[16]      Towards the end of the lease, after the death of the landlord, the tenant removed his greenhouses and sold the materials.  The proprietor’s heirs sued the tenant for damages for the removal of the greenhouses on the basis that they had acceded to the land.  After a proof Lord McLaren held that the original proprietor had let the subjects in the knowledge that a large part of it was to be occupied by greenhouses, and that the clause relating to trees implied an agreement that the greenhouses might be removed by the tenant at the termination of the lease.  His Lordship made reference to the general rule of accession but said that in questions between landlord and tenant as to the removability of fixtures other considerations arose.  Those considerations were (i) the method of attachment to the land, (ii) the nature of the fixture – whether it was capable of being taken to pieces and put together again or incapable of being removed without destruction,  (iii) the use of the fixture – whether it was beneficial to the heritable subjects, or useful only to the tenant in his trade or occupation,  (iv) the relative values of the fixture and the heritable subject,  and (v) the agreement (express or implied) between landlord and tenant as to the conditions on which the fixture was to be placed in or annexed to the estate.

[17]      On the facts of the case Lord McLaren held that only the question of attachment could be answered in the landlord’s favour, the others favouring the tenant.  In relation to the question of whether the fixtures were beneficial to the subjects, Lord McLaren said that the greenhouses bore no relation to the ordinary use of the property and were disproportionate to the size and value of the small house.  They were not put up for the improvement of the house and garden, but to enable the tenant to carry on the pursuit of floriculture, not with a view to profit.  It was unlikely that any future tenant would want them as they were designed for the tenant’s own unusual activities and were capable of being removed without destruction.  The proprietor was aware of the tenant’s intention to erect greenhouses and agreed to their erection on condition that the ground would be restored and the trees which had been removed replaced.  His Lordship concluded:

“It appears to me that as the landlord’s title to fixtures is based on the fact of physical annexation, his consent to the severance of the fixtures carries with it the abandonment of any claim of property in the fixtures otherwise competent to him.  The materials then either revert to the tenant who brought them to the ground or they may be held to have remained vested in the tenant from the beginning in consequence of the agreement that he should remove them.

In the circumstances, I have not found it necessary to consider what are the limits of the rule according to which buildings of this class erected for purposes of trade are considered to be removeable.  I may say, however, that, in my opinion, no well founded distinction can be drawn between trade fixtures and such cases as the present, where the structure, while not subservient to commercial uses, is not an adjunct of the dwellinghouse or ground on which it is put up.  In the result, I assoilzie the defender, and find him entitled to expenses.”

So, as I understand Lord McLaren, it was possible, by agreement, to endow a fixture which was not a trade fixture with the legal attributes of a trade fixture, the principal one being that even although it had become pars soli it could nevertheless be removed by the tenant.  See Brand’s Trustees per LC Cairns at page 20.

[18]      By a majority, the Second Division refused the landlord’s reclaiming motion. Lord Craighill said that the question was settled by the terms of the lease as interpreted by the conduct of the parties immediately after it was signed.  The landlord saw trees being removed and not replaced while the ground they had occupied was covered by a conservatory.  The obligation to replace the trees remained incumbent on the tenant but could not be fulfilled without the removal of the greenhouses.  There was therefore, by necessary implication, a recognition on the part of the landlord of a right in the tenant to take away the greenhouses, as otherwise the obligation to replace could not be fulfilled.  The greenhouses had not been put up for the purpose of benefiting the property but in order that the tenant’s passion for flowers and rare plants could be “more lavishly gratified”.  Lord Justice Clerk Moncrieff agreed and reaffirmed that the clause requiring replacement of the trees showed that it was in contemplation of the landlord that the tenant would remove the greenhouses at the end of the lease.

[19]      I propose to look first at the extent to which the agreed facts in the present case are relevant to the considerations enumerated by Lord McLaren.  There was no evidence as to the relative values of the chalet and the estate but it can be assumed that the value of the chalet is a tiny fraction of the value of the estate.  Certain detailed evidence was agreed in relation to the foundation and construction of the chalet, but specific evidence as to removability was restricted to a statement that the chalet could not be removed in one piece, but required to be dismantled into component parts, the inference being that it was capable of being removed without destruction.  As to whether the erection of chalets was beneficial to the estate, it can in my view be argued that such erections were foreign to the traditional use of a highland estate and that a future tenant wishing to put the estate to its traditional use would be unlikely to wish them to remain.  They were not intended to be permanent.  In these circumstances I consider that the facts of the present case are analogous to those in Ferguson v Paul to the extent that Lord McLaren would have seen the chalets as being capable of being endowed with the attributes of trade fixtures.

[20]      As to the agreement between the parties, in Ferguson the court examined the terms of the lease and the subsequent actings of the parties in order to establish what was in the landlord’s contemplation and what she intended.  Nothing was said about the creation or otherwise of real rights or the naturalia of leases.  Applying that approach to the present case, it is necessary to examine the terms of the head lease, and in particular the terms of Clause Ninth, in order to ascertain what the landlord had in contemplation and what his intention was. 

[21]      The duration of the head lease was 31 years, with no provision for extension.  Under Clause Ninth the head tenants were taken bound to build a number of houses, but they were obliged at the termination of the lease to remove them in order to return the subjects to the proprietor in the condition in which they were received.  In the meantime, they were given the right to sell individual houses to third parties who were to become “their sub-tenants in respect of the solum of each house” (my emphasis), but the sub-tenants were not to receive title to the land on which the house stood.  So a distinction was drawn between the sub-tenant’s relationship to the solum and his relationship to the house, and the question arises as to what the head landlord intended was to be the nature of the sub-tenant’s right in the house.  What did he envisage was to be sold to the sub-tenant by the head tenant? 

[22]      The answer I think is to be found in the terms of the sub-lease.   Clause Fifth provided that the sub-tenant was to build his own house and Clause Seventh provided that it was to remain his property.  Mr MacGregor argued that the latter provision was impossible of fulfilment, but in my opinion it reflects what the head landlord intended when he provided in Clause Ninth of the head lease for the sale of houses to third parties.  He intended that the sub-tenant should receive a right of property in his building.  In so doing, as Lord McLaren said, the landlord abandoned any right of property in the building.  But he also stipulated for the removal of the buildings at the end of the head lease.  Since he had abandoned any right of property in the building, he had no right to prevent the defender, as sub tenant and owner, removing it.  That is consistent with Clause Seventh of the sub-lease which provided for the house built by the sub-tenant to remain his property, and with Clause Fifteenth which obliged the sub-tenant, at the end of the sub-lease, to dispose of the chalet in one of three ways at his option, one of which was to remove it at his own expense .  In my opinion the whole arrangement was designed to circumvent the accession of the chalet to the estate beyond the termination of the head lease and the sub-lease.  The decision in Ferguson shows that in appropriate circumstances accession can be circumvented by parties to a lease agreeing to treat non-trade fixtures in the same way as trade fixtures, or otherwise agreeing to a right of severance.  See Lord Cullen in Shetland Islands Council v BP at page 94J and Reid, The Law of Property in Scotland, para 586.

[23]      While the head lease provided that the head tenant should himself build houses and sell them to sub-tenants, the sub-lease provided for the sub-tenant to build his own house, which was to remain his own property.  In my view this divergence is of no significance since, in both cases, the sub-tenant ended up with a right of property in the house.  The question however arises, standing the law of accession, what is the extent of that right of property?  In my opinion, what the head landlord intended was that the sub-tenant should have the right to occupy the chalet during the currency of the head lease, that he should retain ownership of the materials in the structure, and that he should be obliged to remove the chalet, and so retain ownership of the materials, at the termination of the head lease and the sub-lease.

[24]      Mr MacGregor argued that even if the late Mr Gilchrist, as the original sub-tenant, had a right of severance of the chalet, the defender as his successor did not.  I do not consider that to be so for the following reasons.  Firstly, the pursuer’s predecessor in title as proprietor of the estate abandoned any claim of property in the chalet.  The pursuer cannot now revive it to prevent the defender, who is the valid assignee of the right of property in the chalet, removing it. 

[25]      Secondly, the lease and the sub-lease encapsulated a scheme whereby a portion of the estate was to be given over to the erection and occupation of holiday homes for a finite period of approximately 30 years, at the end of which the tenants and sub-tenants were obliged to remove them.  Having regard to the length of time involved the landlord must have had it in contemplation that that obligation would require to extend to the successors of the original tenants and sub-tenants.

[26]      Thirdly, I consider that there is force in Mr Duthie’s argument based on Stodart v Dalzell 1876 4 R236.  His submission was that the defender’s right of severance was capable of being made a real right and that the pursuer’s knowledge of his right prior to her acquisition meant that it was valid against her.  The right of severance was part and parcel of the right of property in the chalet conferred on Mr Gilchrist.  That right of property has been made real by the defender’s occupation of the chalet without challenge and he cannot now be denied the right of severance.  His right of property does not fall to be equiparated to a personal right of occupancy such as in the case of Wallace v Simmers 1960 SC 255.

[27]      The extent of the pursuer’s knowledge of the defender’s right can be gleaned from the history of the ownership of the estate and of the occupants the head tenancy.  In 1969 when the head lease was granted the estate was in the ownership of the marriage contract trustee of JDG MacRae and Lady Phyllis Hervey.  The head lease was granted by the then trustee JDH MacRae who I understand to have been the pursuer’s father.  In 1988 the pursuer was assumed a trustee of the trust and in that capacity in 1991 she and her fellow trustee conveyed the estate to the pursuer herself absolutely.  The head lease was granted in favour of Loch Fyne.  In 1982 JDH MacRae remained the proprietor of the estate in his capacity as sole marriage contract trustee, but he was also a director of Loch Fyne.  In that capacity he executed the assignation of Loch Fyne’s rights in the head lease and the sub-leases in favour of the pursuer and her husband.  Subsequently in 1988, the pursuer and her husband assigned those rights to themselves as partners of the firm of Ballimore Farm.  Accordingly, in one capacity or another, the pursuer has been a proprietor of the estate since 1988 and joint head tenant since 1982.  In these circumstances she must be taken to have been aware of the provisions of both the head lease and the sub-lease.

[28]      Finally, having regard to the provisions of the head lease to which I have referred, and under which the sub-lease was granted, and the terms of the sub-lease itself, I consider that the provisions of Clause Fifteenth fall to be regarded as inter naturalia of the sub-lease.

[29]      For all these reasons I conclude that the defender has a right of severance of the chalet no.25 Ballimore Estate.  In these circumstances I shall sustain the pleas-in-law for the defender nos.2, 6 and 7 and repel the pursuer’s pleas-in-law in their entirety.