Scottish Court of Session Decisions

FIRST DIVISION, INNER HOUSE, COURT OF SESSION

[2016] CSIH 72

A512/00

Lord President

Lord Brodie

Lady Clark of Calton

 

OPINION OF LORD CARLOWAY, the LORD PRESIDENT

in the reclaiming motion

by

BARONESS MIRANDA VAN LYNDEN

Pursuer and Reclaimer;

against

COLIN GILCHRIST

Defender and Respondent:

Act: CHS MacNeill QC, Martin-Brown; Gillespie MacAndrew LLP

Alt: Duthie; Drummond Miller LLP

6 September 2016

[1]        It is not disputed that chalet 25 acceded to the land upon which it was built and therefore falls to be regarded as part of the heritage for the purposes of determining its present ownership.  I agree therefore that the pursuer is entitled to a declarator to that effect.  The remaining issue, of whether the pursuer is entitled to interdict the defender from removing the chalet, falls to be tested as at the point immediately before the termination of the lease and sub-lease, when the pursuer obtained an interim interdict.

[2]        The contention in the grounds of appeal, that any right to sever was a personal one and therefore did not transmit against the landlord’s successor in title (ie the pursuer), was abandoned.  The case therefore proceeded as if it were a dispute between the original parties to the lease and sub-lease.

[3]        A tenant has no general right to remove items which he has fixed to the land.  There are exceptions to this in the case of trade fixtures and agricultural tenancies.  However, neither is pled.  Although there was a late attempt at the end of the hearing of the reclaiming motion, following questions from the Bench, to amend the defender’s pleadings to refer to the chalets being trade fixtures (which they may well be for the purposes of the head lease), such an attempt came too late, relative to the date of the hearing, to be permitted, given the extraordinary history of this litigation.

[4]        It is not disputed that an owner of heritage can contract to confer a right or obligation upon a tenant, or any third party, to sever items fixed upon his land.  Clause ninth of the head lease required the tenants to build “houses” on the land leased.  The tenants were entitled to “sell” these houses to third parties, who would thereby become sub-tenants of the relative ground.  Since the houses would have acceded to the heritage, a question arises as to how the tenants could sell the houses at all.  The answer to that is contained in clause ninth whereby the houses were to be treated as “tenant’s improvements”, a term peculiar to agricultural tenancies (see now the Agricultural Holdings (Scotland) Act 1991, s 34) whereby, for example, the tenant would be entitled to remove a fixture or claim compensation for any fixture which he had been required to build (cf ibid s 18).

[5]        Clause ninth states that all buildings erected by the tenants “shall be” removed at the termination of the lease and the subjects returned to their original condition.  Although it does not say so expressly, this undoubtedly created an obligation on the tenants to remove the buildings, including the chalets, at the end of the lease.  Although, in certain situations, this might be regarded purely as an obligation on the tenants which might be waived, there is no suggestion of any such waiver here (unless the act of seeking an interdict is so interpreted).  In regulating his own position, a tenant would be entitled, if not expected, to proceed on the basis that he would require to remove the chalets at the appropriate time; a matter which may result in expense but may also have compensatory benefits in the form of the value of the fixtures.  At all events, viewed at the point immediately before the lease’s termination, it would not be possible to classify the performance of this obligation by the tenants as a civil wrong which the landlord might interdict.  On the contrary, the creation of the obligation to remove the chalets would appear, on the ratio of Ferguson v Paul (1885) 12 R 1222, to involve an implied agreement that this is what would happen (see Lord Ordinary (McLaren) at 1227 “agreement”; Lord Craighill at 1228 “understanding”; LJC (Moncrieff) at 1229 “specified or implied agreement”).

[6]        The question then is whether, although the tenants might not be interdicted, a sub-tenant, namely the defender, could be prevented from carrying out any equivalent obligation in the sub-lease.  The short answer to that must be in the negative in the absence of a right dependent upon the terms of clause ninth.

[7]        It is clear from the terms of clause fifteenth in the sub-lease that the tenants did regulate their position on the basis that the chalet would be removed at the end of the lease, since they did not just repeat the obligation to remove, contained in the head lease, in the sub-lease, but offered their sub-tenant an option to remove “the bungalow” rather than accept payment of £3,500 or oblige the tenant to sell the chalet on the open market.  Put another way, following upon the terms of clause ninth in the head lease, the tenants proceeded on the basis that what was contracted for in the head lease by way of removal of the chalet would happen.  They acted accordingly in their relations with the sub-tenant, namely the defender.  From the defender’s point of view, upon considering the terms of his sub-lease, he would have been entitled, upon reading the head lease, to proceed on the basis that he had a valid option to remove the chalet, since such an option was consistent with the more general obligation on the tenant in the head lease.

[8]        For all of these reasons, which accord broadly with those of Lord Brodie, to whom I am grateful for setting out the facts and issues for determination, I agree that the reclaiming motion should be allowed to the extent of sustaining the pursuer’s second plea-in-law, repelling the defender’s seventh plea-in-law and granting the declarator.  However, the pursuer’s third plea-in-law should be repelled, the defender’s sixth plea-in-law sustained and decree of absolvitor from the second conclusion should be pronounced. 

FIRST DIVISION, INNER HOUSE, COURT OF SESSION

[2016] CSIH 72

A512/00

Lord President

Lord Brodie

Lady Clark of Calton

 

OPINION OF LORD BRODIE

in the reclaiming motion

by

BARONESS MIRANDA VAN LYNDEN

Pursuer and Reclaimer;

against

COLIN GILCHRIST

Defender and Respondent:

Act:  CHS MacNeill QC, Martin-Brown; Gillespie MacAndrew LLP

Alt:  Duthie; Drummond Miller LLP

6 September 2016

Introduction

[9]        This is a reclaiming motion in an action where the summons passed the signet on 29 February 2000.  It concerns a wooden chalet constructed as a holiday residence.  The chalet is situated on the Ballimore Estate, Otter Ferry, Argyll (“Ballimore”).  It is designated chalet number 25.  The single issue in the reclaiming motion is whether the former sub‑tenant of Chalet 25, who is the defender and respondent, can lawfully remove the chalet from the solum to which it is physically attached and to the ownership of which parties are agreed it has acceded.  The respondent claims to be entitled to do so by virtue of the terms of his sub-lease, notwithstanding that that would involve the severance of the chalet from the land of which, as a matter of property, it has become part.  The respondent has intimated that he is entitled to remove it and that he intends to do so.  The pursuer and reclaimer contends that because the chalet has acceded to Ballimore and she is heritable proprietor of Ballimore, she is entitled to prevent removal of the chalet.  She seeks declarator to that effect and interdict against the defender from dismantling or removing the chalet. 

 

Procedure

[10]      On 29 February 2000 the pursuer and now reclaimer obtained interim interdict on an ex parte application against the defender and now respondent from dismantling or attempting to dismantle or remove Chalet 25.  Thereafter, although it would appear that defences were lodged and the record closed, little happened and the cause fell asleep.  So it remained until 3 April 2014 when, on the unopposed motion of the respondent, the cause was restored to the adjustment roll.  I would understand that this was prompted by the reclaimer having given notice to the respondent (by letter dated 25 November 2013) that he should remove his belongings from Chalet 25 by 31 December 2013, he having not done so and the reclaimer having raised proceedings for removal in the sheriff court.  The sheriff court proceedings are currently sisted.

[11]      A procedure roll debate in the action was fixed for 5 February 2015 but discharged and a proof before answer allowed.  The cause called for proof before the Lord Ordinary on 30 June 2015.  By that date parties had entered into two joint minutes of admission, these being respectively numbers 24 and 25 of process, which were lodged in court on 30 June.  Paragraphs 14 to 33 of number 24 of process describe Chalet 25, its mode of construction and degree of physical attachment to the solum beneath it, but insofar as these matters bear on the question as to whether it has acceded to and therefore become part of the land of which the reclaimer is proprietor, they were superseded by number 25 of process in terms of which parties agreed that Chalet 25 has acceded to the heritable property owned by the reclaimer.

[12]      At the proof on 30 June 2015 the parties were agreed that the case could be determined on the basis of submissions and the admissions in the pleadings and in the joint minutes.  Having heard oral submissions and considered written submissions on 1 July 2015 the Lord Ordinary made avizandum.  On 5 November 2015 he sustained the second, sixth and seventh pleas-in-law for the defender and now respondent, and repelled all the pursuer and reclaimer’s pleas-in-law.  Before this court Mr Calum MacNeil QC, who appeared on behalf of the reclaimer, made certain criticisms of the terms in which the interlocutor of 5 November 2015 is framed.  While I see the force of these criticisms and while I accept that given the concession made by the now respondent as expressed in the joint minute number 25 of process the Lord Ordinary might have pronounced decree of declarator in terms of the first conclusion (for what that was worth), I do not consider these matters as being of importance.  The Lord Ordinary made clear his decision on the only matter in issue, that decision being that the defender and now respondent was entitled to dismantle and remove Chalet 25 from Ballimore.  That decision is now reclaimed against.

 

The Chalet
[13]      Ballimore is on the west side of the Cowal Peninsula and on the east side of Loch Fyne.  Chalet 25 is situated in a wooded area, a short distance back from the estate road leading from the public road to Ballimore House.  On the other side of the estate road is the shore of Loch Fyne.

[14]      Chalet 25 was built in 1970 and has remained in its present position since then. It is approximately 10 metres long and 8 metres deep.  It has supplies of electricity and water and connection to a sewer.  Were it to be removed, it could not be removed in one piece.  It is one of a number of similar chalets on Ballimore.

 

The reclaimer’s title
[15]      The pursuer and reclaimer is the heritable proprietor of Ballimore and therefore of lands including the solum of Chalet 25, by virtue of a disposition in her favour by Mrs Marigold Elizabeth MacRae and the reclaimer, as trustees acting under the ante nuptial contract of marriage between John Duncan George MacRae and the Lady Phyllis Hervey, dated 30 August 1991 and 2 September 1991 and recorded in the GRS for the county of Argyll on 17 February 1992.  It is by virtue of her title as the now heritable proprietor of Ballimore and only by virtue of that title that the pursuer sues.

 

The respondent’s title
[16]      By minute of lease dated 21 April and 1 May 1969 the then heritable proprietor of Ballimore, John Duncan Harvey MacRae as trustee acting under the ante nuptial contract of marriage between John Duncan George MacRae and the Lady Phyllis Hervey, granted a lease (“the head lease”) of a portion of the estate, including the solum on which Chalet 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…”.

 

[17]      By a sub-lease dated 2 and 7 December 1970 (“the sub lease”) Loch Fyne (therein referred to as “the Company”) sub-let to the defender’s father, the late William Gilchrist (therein referred to as “the sub-tenant”), the area of solum on which Chalet 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 sub-lease were as follows:

“Fifth	In respect that the sub-tenant has agreed with the company to erect on the subjects let a bungalow at a cost of Three thousand five hundred pounds or thereby the sub-tenant shall be bound to complete the erection of said bungalow not later than one year from the date of entry hereunder”.
“Seventh	The said bungalow shall be deemed to be an improvement to the subjects let by the sub-tenant and shall remain the property of the sub-tenant.”
“Tenth	The Company hereby binds and obliges itself that in the event of the Sub-Tenant terminating this sub-lease at any time after the thirty first day of December Nineteen hundred and seventy six the Company will on such termination purchase the said bungalow from the Sub-Tenant at a price of Three thousand five hundred pounds.”
“Eleventh	The Sub-Tenant shall have no right to sub-let the subjects let hereby but shall have the following rights to assign this sub-lease namely:- (Primo) the Sub-Tenant may assign this sub-lease at any time to his issue and by testamentary disposition or intestate succession to his executors and successors thereunder, and (Secundo) the Sub-Tenant may assign this sub-lease to any other assignee approved in writing by the Company which approval shall not be unreasonably withheld on payment to the Company of eight per cent of the sale price of the bungalow or Two hundred and eighty pounds whichever is the less”.
“Twelfth	Any assignee hereof shall be bound by the full provisions hereof in the same manner as the Sub-Tenant and it is hereby declared that the term ‘Sub-Tenant’ herein includes any assignee allowed and approved as aforesaid.”
“Fifteenth	On any termination of this sub-let otherwise than by the Sub‑Tenant as aforesaid the Sub-Tenant shall be bound within one month from said termination to exercise one of the following three alternative options namely: - (Primo) to remove the said bungalow at his own expense, (Secundo) to call on the Company to purchase the said bungalow at a price of Three thousand five hundred pounds in which case the Company hereby binds and obliges itself so to purchase the said bungalow and to pay the price within one month or (Tertio) to call on the Company to act as his agent for the sale of the bungalow in which case the Company shall make reasonable endeavour to sell the said bungalow at the market price thereof to a purchaser acceptable as Sub-Tenant hereunder but the Sub-Tenant shall be bound to accept the terms of any such sale negotiated by the Company, and the Company shall be entitled to receive from the purchaser the price of the said bungalow and deduct therefrom a commission of eight per cent of the price thereafter within fourteen days accounting to the Sub-Tenant for the balance less any sums due hereunder by the Sub-Tenant….”

 

[18]      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 of the late William Gilchrist, to the reclaimer and her husband, Baron Willem Van Lynden.  Baron Van Lynden and the reclaimer thus became the head tenants under the head lease and the mid landlords of the sub-tenant.

[19]      Subsequently, by assignation dated 16 June 1988, Baron Van Lynden and the reclaimer 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. 

[20]      The respondent’s mother (“Mrs Gilchrist”) was confirmed as executor of the late William Gilchrist’s estate on 12 May 1981, having been bequeathed his whole estate by his Will dated 24 September 1974.  The respondent 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.

 

The Lord Ordinary’s reasoning
[21]      Before the Lord Ordinary the pursuer and now reclaimer submitted that as Loch Fyne was not proprietor of the solum of Chalet 25 it could not grant a right of severance in favour of the sub-tenant and an entitlement that he would remain proprietor of the chalet, but even if Loch Fyne, as head tenant and mid landlord, could create such right and entitlement, such right and entitlement not being inter naturalia of the sub-lease they did not transmit as against the reclaimer as successor mid landlord.  In assessing these submissions the Lord Ordinary considered the decision in Ferguson v Paul (1885) 12R 1222 to be of particular importance.  It was a case that was binding upon him and the only one cited which dealt specifically with the creation of a right of severance of fixtures which had acceded to heritable estate.  It provided authority for the proposition that 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.  The Lord Ordinary considered the facts in Ferguson to be analogous to those in the present case. As for the requisite agreement that was to be found in Clause Ninth of the head lease (sale to the sub-tenant of the house while being sub‑tenant of the solum and an obligation to remove all buildings at termination of the head lease) taken with Clauses Seventh (the bungalow remaining the property of the sub-tenant) and Fifteenth (obligation on the sub-tenant on termination of the sub-let to exercise the option of either removing or selling the bungalow) of the sub-lease; what the marriage contract trustee as the then proprietor of Ballimore and head landlord had 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.

[22]      The pursuer and now reclaimer had further argued that even if William Gilchrist, as the original sub-tenant, had a right of severance of the chalet, the defender and now respondent as his successor did not.  The Lord Ordinary rejected that argument for the following reasons: (1) the then marriage contract trustee, as proprietor of Ballimore, had abandoned any claim of property in the “houses ...used only as holiday residences” by the terms of Clause Ninth of the head lease whereas the defender and now respondent was an assignee of the right of property in the chalet; (2) the head lease and the sub-lease encapsulated a scheme (to which the proprietor as head landlord was party) whereby a portion of Ballimore 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, the period being such that the proprietor must have had it in contemplation that that obligation would require to extend to the successors of the original tenants and sub-tenants; (3) the right of severance, being part and parcel of the right of property in the chalet conferred on William Gilchrist, was capable of being made a real right and the pursuer and now reclaimer’s knowledge of the sub‑tenant’s right prior to her acquisition of the property (which he inferred from his consideration of the history of the ownership of Ballimore and the occupancy of the head tenancy) meant that it was valid against her: Stodart v Dalzell (1876) 4 R 236; and (4) having regard to the provisions of the head lease and under which the sub‑lease was granted, the provisions of Clause Fifteenth  fell to be regarded as inter naturalia of the sub-lease.

 

Position of parties at the hearing of the reclaiming motion
[23]      The discussion before this court was more limited than the arguments which had been presented to the Lord Ordinary, the way in which the Lord Ordinary had dealt with these arguments and the terms of the grounds of appeal, might have suggested was going to be the case.  For his part, Mr MacNeill expressly abandoned paragraphs (c), (d) and (f) of his second ground of appeal (see para [30] infra).  He took his stand on the basis of the following propositions.  As the parties had agreed by joint minute, Chalet 25 had become part of the heritable property that was Ballimore by virtue of being physically attached to it and by operation of the common law principle of accession whereby an accessory (here the chalet) became subsumed in the principal (here the land). That had occurred in 1970.  That Chalet 25 had become part of Ballimore and therefore the property of the proprietor of Ballimore for the time being, was not something that parties could alter by agreement.  What a proprietor could do, however, was, without prejudice to his being its owner, to agree that another party, a tenant perhaps, had the right to sever something, such as Chalet 25, which had become part of the heritage by virtue of accession.  Such an agreement had to be express and it had to be an agreement by the proprietor, as the party with title to agree such an encroachment on what otherwise would be his proprietary rights.  It was the respondent’s case that he had such a right of severance in respect of Chalet 25 and that it had been conferred upon him by Clause Fifteenth of the sub‑lease, but as was apparent from a consideration of its terms, Clause Fifteenth does not confer such a right.  The respondent was seeking to conflate the mid‑landlord’s right to require removal with a right on the part of the sub-tenant to remove (and therefore sever) the chalet from the solum.  But not only does Clause Fifteenth not confer a right of severance, neither it nor any other provision of the sub-lease can confer such a right because the author of the sub-lease was not the proprietor of the heritage and therefore did not have capacity to encroach on the proprietor’s right of ownership of anything that had become part of the heritage.  Thus the respondent did not have a right to sever Chalet 25 from the solum of Ballimore and therefore had no defence to the action. The reclaiming motion should be allowed.

[24]      For his part, Mr Duthie, while adopting his note of argument, recognised that the position taken by Mr MacNeill meant that a number of issues which were referred to in the note of argument and which had exercised the Lord Ordinary no longer required to be addressed.  He only relied on Ferguson v Paul as authority for the proposition (which he did not understand to be disputed) that it was possible to create a right to sever an item which had acceded to heritage.  He submitted that such a right of severance was to be found in Clause Fifteenth of the sub-lease and he did not take it to be in issue, because Mr MacNeill had not put it in issue, that if that was the proper construction of Clause Fifteenth, such a right could be regarded as inter naturalia of a lease falling within the category which included the present sub‑lease. While at an early stage in his submissions Mr Duthie confirmed that the respondent’s case was of a right to sever derived from Clause Fifteenth of the sub‑lease read with Clause Ninth of the head lease, in the course of the discussion of the terms of the leases he made the point that what was in issue in the case was an application for interdict and that therefore it required to be demonstrated by the pursuer and now reclaimer that the apprehended act of the defender was a wrong.  When regard was had to Clause Ninth of the head lease it could not be said that removal of the chalet in exercise of one of the options under Clause Fifteenth of the sub-lease was a wrong.  In Mr Duthie’s submission the case turned on the construction of Clause Ninth of the head lease; if he was correct in submitting that it permitted severance of the chalet then the respondent should succeed, if he was not correct then the respondent would fail.

 

Decision
[25]      The respective positions adopted by Mr MacNeill and Mr Duthie in the course of the discussion of the reclaiming motion put the case in a different posture than it had assumed before the Lord Ordinary.  While disruptive of such preconceptions as might have been formed about the case from reading the papers, I would see this development as having been helpful in arriving at an understanding of what the case is really about.  I shall explain what I mean by this but first, in order to clear the ground of what the case is not about (at least in the sense of anything controversial) I turn to the first ground of appeal.

[26]      The first ground of appeal relates to the first conclusion which is in these terms:

“For declarator that the chalet known as Chalet number 25, Ballimore Estates has by virtue of its attachment to the land thereunder, namely the heritage described in the disposition in favour of the pursuer dated Thirtieth August and Second September both Nineteen Hundred and Ninety One and recorded on the Seventeenth February Nineteen Hundred and Ninety Two, acceded to the same and accordingly that the pursuer is the heritable proprietor of the same said chalet.”

 

As appears from the pleadings and, in particular, answer 3, the defender and now respondent disputed the proposition that Chalet 25 had acceded to the solum of the heritage.  I would understand that that position was maintained right up to the first day of the diet of proof when a joint minute was lodged as number 25 of process which was in these terms:

“Chalet number 25, Ballimore Estates has acceded to the heritable property owned by the pursuer.”

 

The joint minute conceded everything that had been sought by way of declarator.  Nevertheless, the Lord Ordinary did not grant decree in terms of the first conclusion.  In his Opinion he does not explain why.  It would be understandable if, as the respondent suggests in his note of argument, the Lord Ordinary considered that to do so would be of no practical effect given his decision on the only live question in the case which was whether, notwithstanding the position on ownership, the defender and respondent should be interdicted from removing Chalet 25 from the solum to which it had acceded.  The purpose of litigation is to resolve questions as to which there is a dispute and not questions that have been superseded by agreement.  Despite that consideration, I would accept that declarator as to the extent of the rights conferred by a party’s title, where these rights have been challenged in a serious way, is a remedy to which a party may be said to be entitled even if at close to the last moment the challenge is withdrawn.  Accordingly, as I understood Mr MacNeill to insist upon his first conclusion, I would propose to your Lordship and your Ladyship that we should allow the reclaiming motion, at least to the extent of granting decree in terms of that conclusion.

[27]      It is the reclaimer’s second ground of appeal which challenges the Lord Ordinary’s conclusion that the defender and now respondent is entitled to remove Chalet 25 and that therefore he should be assoilzied from the second conclusion of the summons which is:

“For interdict against the defender from dismantling or removing or attempting to dismantle or remove the said chalet.”

 

Part of the argument before the Lord Ordinary appears to have concerned what might be taken from cases on retention of title.  The Lord Ordinary clearly did not find this helpful and the exercise was not repeated before this court.  The rest of the argument before the Lord Ordinary concerned what in submissions to this court was described as a “right” of severance and in the speech of Lord Chancellor Cairns in Brand’s Trs v Brand’s Trs (1876) 3R (HL) 16 at 20 as “a certain power of severance and removal during the tenancy”.  This passage in Brand’s Trs can be taken as the point of departure for the Lord Ordinary’s opinion.  Nothing in it bears directly on the controversy in the present case but Mr MacNeill stressed its importance as providing a necessary background to which, in his submission, the Lord Ordinary had had insufficient regard. It is accordingly convenient to repeat it:

“… I would remind your Lordships that there are with regard to matters of this kind, which are included under the comprehensive term of “fixtures,” two general rules, a correct appreciation of which will, as it seems to me, go far to solve the whole difficulty in this case. My Lords, one of those rules is the general well-known rule that whatever is fixed to the freehold of land becomes part of the freehold or the inheritance. The other is quite a different and separate rule. Whatever once becomes part of the inheritance cannot be severed by a limited owner, whether he be owner for life or for years, without the commission of that which in the law of England is called waste, and which, according to the law both of England and Scotland, is undoubtedly an offence which can be restrained. Those, my Lords, are two rules—not one by way of exception to the other, but two rules standing consistently together. My Lords, an exception indeed, and a very important exception, has been made, not to the first of these rules, but to the second. To the first rule which I have stated to your Lordships there is, so far as I am aware, no exception whatever. That which is fixed to the inheritance becomes a part of the inheritance at the present day as much as it did in the earliest times. But to the second rule, namely, the irremovability of things fixed to the inheritance, there is undoubtedly ground for a very important exception. That exception has been established in favour of the fixtures which have been attached to the inheritance for the purpose of trade, and perhaps in a minor degree for the purpose of agriculture. But, I repeat, the exception is not to the first of these rules, but the exception is to the second. Under that exception a tenant who has fixed to the inheritance things for the purpose of trade has a certain power of severance and removal during the tenancy.”

 

Professor Reid (The Laws of Scotland, Stair Memorial Encyclopaedia, vol 18, paras 578 and 582) explains that although the Lord Chancellor may have said that he proceeded to look at matters “in point of principle” what he was doing was applying English rules in place of what had been a rather more fact-sensitive Scottish approach which was less favourable to the operation of accession.  Be that as it may, for present purposes the importance of the passage is to demonstrate that since 1876 it has been the law that once an article has been sufficiently securely fixed to heritage it becomes a fixture and thus a part of the heritage, but that notwithstanding they have become fixtures, certain items may be subject to a power (otherwise a right) of severance and removal.  The most important example of severable fixtures are trade fixtures but the Lord Chancellor did not exclude the possibility of other examples and from his consideration of Ferguson v Paul the Lord Ordinary concluded that 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 attribute being that even although it had become pars soli it could nevertheless be removed by the tenant on termination of the lease.

[28]      I do not find it necessary to decide whether the Lord Ordinary’s analysis of Ferguson is correct.  The only purpose for which it is relied on by the respondent is the conceded point that a right of severance sufficient to bring a case within the exception to the second rule in Brand’s Trustees can be created by agreement.  However, the attention that the Lord Ordinary gave to Ferguson reflects the way that the case had been presented to him: the irremovability of the chalet which was a consequence of the pursuer’s right of property arising from accession and the second rule in Brand’s Trustees could and had been trumped by a right of severance conferred by the sub lease bringing the case into the exception to the second rule.

[29]      A difficulty in the way of the respondent resisting the reclaimer’s second conclusion by meeting the reclaimer’s proprietary right that the chalet be not removed with the respondent’s supposed contractual right to sever the chalet (a competition of rights, as it were), is that a contractual right is by its nature personal, in other words it is only good against the other party to the contract.  It was to mitigate the consequences of that for “the poor people who laboured the ground” that the Leases Act 1449 was enacted.  Here, while the respondent is in as good a position as his father, the original sub-tenant, by virtue of the assignation in his favour, the original sub-tenant’s rights, insofar as these rights were personal, were only good, at best, against the marriage contract trustee (I say “at best” because the original sub-tenant could only have obtained rights from his author, Loch Fyne, which Loch Fyne had obtained from the marriage contract trustee in terms of the head lease and which it could then expressly or impliedly assign to the sub-tenant in the sub-lease).  While the reclaimer may derive her title as proprietor from the marriage contract trustee, she is not (at least for this purpose) the marriage contract trustee but, rather, a successor in title.  Accordingly, such rights as may have been conferred by her predecessor in title are not good against her unless they are real rights or, for some reason or another, they can be treated as if they were real rights.

[30]      It was because the case was presented to him in the way that it was, as a competition of rights, that the Lord Ordinary’s reasoning follows the course that it does.  Reading the grounds of appeal and the parties’ respective notes of arguments might have suggested that this is how the reclaiming motion would be presented.  However, as I have already indicated, the case adopted a rather different posture as the arguments for the respective parties were developed.  What Mr MacNeill’s argument came to was that the case was not and could not be about a right of severance because what was founded on by the respondent, Clause Fifteenth of the sub‑lease, was not a right-conferring provision. Rather it was an obligation-imposing provision, just as, in respect of removal of the chalets Clause Ninth of the head lease was an obligation-imposing provision.  The reclaimer had the right that the chalet should not be removed but the respondent simply had no countervailing right which he could put into a competition. Were he to be wrong about that, Mr MacNeill made no point as to the transmissibility of such a right against the reclaimer, as successor to the marriage contract trustee(s).  He made this very clear by abandoning certain elements within the second ground of appeal, these being matters in respect of which it was said that the Lord Ordinary had erred in law and fact by:

“(c)      Failing to consider whether any right of severance granted by John MacRae (“the original landlord”) in favour of the mid-landlords was a personal right rather than a real right and was therefore not enforceable against the original landlord’s successors;

(d)       Finding the provisions of clause fifteenth of the sub-lease were inter naturalia and transmitted to the defender;

(f)        Finding that the pursuer had been a proprietor of the estate in some capacity since 1988 and ignoring the status of an individual, a trust and a partnership as a separate legal entities.”

 

[31]      I see force in Mr MacNeill’s submission that neither Clause Ninth of the head lease nor Clause Fifteenth of the sub-lease is framed as a provision conferring a right of severance on the head tenant or sub-tenant respectively.  Clause Ninth of the head lease provides:

“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…”

 

As was observed in the course of discussion, strictly speaking Clause Ninth does not specify who it is who shall remove the buildings and works.  Were that to matter, I consider that the provision should be construed as imposing the obligation on the head tenant but I do not see that it does matter; as Mr MacNeill submitted, when it comes to removal, Clause Ninth is not expressed in terms of right.  Similarly, although there is a reference to “options”, Clause Fifteenth of the sub-lease is concerned with what the sub-tenant is “bound” to do within one month from the termination of the sub-lease. One way of the sub‑tenant meeting that obligation is “to remove the said bungalow at his own expense”.

[32]      As I have touched on and as was foreshadowed by paragraph (c) of the second ground of appeal, not all provisions of a lease transmit against the successor of the landlord.  Those that do are described as being inter naturalia of the lease.  The law is as explained by Lord Drummond Young in The Advice Centre for Mortgages v McNicoll 2006 SLT 591 under reference to Bisset v Magistrates of Aberdeen (1898) 1 F 87 and Optical Express (Gyle) Ltd v Marks and Spencer Plc 2000 SLT 644.  I do not see this consideration to be of any materiality on Mr MacNeill’s approach to Clause Ninth and Clause Fifteenth. He certainly did not suggest that it was and by expressly abandoning paragraph (c) of the second ground of appeal he would appear to have made clear that it was not.  For my part, once the provisions of Clause Ninth and Clause Fifteenth are seen as obligations on respectively the head tenant and the sub‑tenant for the benefit of the landlord and mid landlord (and therefore of the nature of reservations from what is otherwise let out), the need to consider whether the provisions are inter naturalia of the lease and sub-lease does not arise.

[33]      What then is the result of moving away from an analysis of the case which depends on whether the respondent, as assignee of the original sub-tenant, has a right of severance of the chalet from the heritage good against the reclaimer as successor of the marriage contract trustee?  In my opinion, putting questions of right to one side brings into relief the more fundamental question, posed in the course of his submissions by Mr Duthie, which is whether the respondent’s proposed removal of Chalet 25 from the solum is a wrong which the reclaimer as proprietor of Ballimore is entitled to interdict?  I find it impossible to answer that question other than in the negative.  The matter falls to be tested as at 29 February 2000 immediately before the termination of the head lease and the sub-lease when the reclaimer obtained the interim interdict which she now seeks to be made perpetual.  As at that date the respondent may be taken to have intimated his exercise of the option which he was bound to exercise in terms of Clause Fifteenth of the sub-lease by removing the bungalow at his own expense.  At least in a question with the mid landlord (then Ballimore Farms) how could that be said to be a wrong?  Rather it was the fulfilling of an obligation owed to Ballimore Farms as the respondent’s landlord.  Equally, how could the removal of Chalet 25 as one of the “buildings and works” erected in terms of Clause Ninth of the head lease be regarded as a wrong, whether in a question between Ballimore Farms as head tenant and the reclaimer as proprietor and head landlord, or as between the respondent as Ballimore Farms’ sub-tenant and the reclaimer as proprietor, when that is exactly what Clause Ninth provided for (admittedly together with the removal of other buildings and works which I have assumed were also erected albeit there was no evidence about that)?  It is true, as was mentioned in the course of discussion, that an obligation, at least if conceived exclusively in favour of one party to a contract, may be waived by that party, but in the present case there was no suggestion that any obligation had been waived.  Mr MacNeill’s submissions on Clause Ninth of the head lease and Clause Fifteenth of the sub-lease proceeded upon the basis that the obligations they imposed were extant.

[34]      While we were not addressed on the case and I note that Rankine (Law of Leases in Scotland (1916) at p305) considered the decision to be questionable, I would observe that the conclusion that I have come to: that it is not wrongful for a sub-tenant to seek to perform an obligation under a sub-lease which is consistent with the provisions of the head lease, is in line with the approach of the majority of Inner House in Ferguson v Paul where the obligation imposed on the tenant by the lease to replace trees which had been removed in order to erect greenhouses meant that the tenant could not be held liable in damages for dismantling and taking away the greenhouses, that being a necessary preliminary to replacing the trees which he was expressly obliged to do.

[35]      I mention one other point, although given my opinion on whether what is complained of is a wrong which can be interdicted, it is unnecessary to pursue it.  It arose from the observation from the bench that in the circumstances of the case Chalet 25 might be considered to be a trade fixture and therefore removable (by the head tenant) at the termination of the head lease.  Mr Duthie frankly conceded that this had not occurred to him but that, once it was suggested to him, the point that holiday chalets might well be considered as the trade fixtures of a tenant in the business of letting out holiday accommodation seemed eminently arguable.  Recognising that this did not feature as part of his case on record he sought leave to introduce a short amendment to the effect that Chalet 25 was a trade fixture.  I would propose to your Lordship and your Ladyship that the application to amend be refused, it having been opposed on behalf of the reclaimer.  It involved a substantial departure from anything previously on record and came very late, whether one views that from the perspective of the day of the hearing or of the more than sixteen years of the litigation.  Critically, the questions of whether something in the nature of a building could ever be regarded as a trade fixture and how it would avail the respondent if it could be (he not being the tradesman in question) were not developed in argument.

[36]      I would propose that the court recall the interlocutor of the Lord Ordinary, sustain the pursuer’s second plea-in-law, repel the pursuer’s third plea-in-law, sustain the defender’s sixth plea-in-law, repel the defender’s seventh plea-in-law and grant decree in favour of the reclaimer in terms of the first conclusion but assoilzie the respondent from the second conclusion, reserving all questions of expenses.

FIRST DIVISION, INNER HOUSE, COURT OF SESSION

[2016] CSIH 72

A512/00

Lord President

Lord Brodie

Lady Clark of Calton

 

OPINION OF LADY CLARK OF CALTON

in the reclaiming motion

by

BARONESS MIRANDA VAN LYNDEN

Pursuer and Reclaimer;

against

COLIN GILCHRIST

Defender and Respondent:

Act: CHS MacNeill QC, Martin-Brown; Gillespie MacAndrew LLP

Alt: Duthie; Drummond Miller LLP

 

6 September 2016

Summary
[37]      I am grateful to Lord Brodie for setting out in detail the history of this case, the relevant terms of the head lease and sub-lease and summarising the submissions made by counsel for the parties, both before the Lord Ordinary and before this court.  I agree with his legal analysis in which he accepted that neither Clause Ninth of the head lease nor Clause Fifteenth of the sub-lease conferred a right of severance on the head tenant or subtenant respectively.  I am unable, however, to agree with his analysis in paragraphs 25 and 26 which led to his decision to refuse the pursuer’s conclusion for interdict.  Before I explain my reasoning, it may be helpful if I put the dispute of the parties into context by reference to the pleadings. 

 

The pleadings
[38]      In the action for declarator and interdict, the pursuer sought (1) declarator that Chalet 25, Ballimore Estates (“the chalet”) acceded to the heritage owned by the pursuer and (2) interdict against the defender from dismantling or removing or attempting to dismantle or remove the said chalet.  The pleadings narrate the complicated history of the pursuer’s title, the head lease and sub-lease.  In Article 3 of condescendence the pursuer has averments about accession of the chalet to the land.  This is disputed by the defender in answer 3 and it is averred: 

“The Chalet is not joined to the heritage.  The Chalet is capable of being removed without causing damage to the heritage.  The Chalet is not functionally subordinate to the heritage.  The Chalet is not heritable property:  accession of the Chalet to the heritage has not taken place.”

 

[39]      It is not disputed by the parties that the sub-lease has been terminated.  The defender in answer 4 seeks to oppose interdict principally relying on Clause Fifteenth of the sub-lease and Clause Ninth of the head lease and averments to the effect that the chalet is the property of the defender and that no accession of the chalet to the heritage has taken place.  The defender however also pled an alternative case which stated: 

“In any event, the defender’s entitlement to remove the Chalet is not contingent on accession not having taken occurred.  Esto accession has occurred (which is denied), standing the provisions of the Head lease and sub-lease… the defender remains entitled to sever and remove the Chalet from the heritage.  But for the interim interdict obtained by the pursuer on 29 February 2000 he would have done so during 2000… ”

 

[40]      In relation to the merits, the pursuer set out pleas-in-law in support of declarator and interdict.  The defender has no plea seeking a declarator that he is the owner of the chalet.  In relation to the merits he resisted the pleas of the pursuer with these pleas: 

“4.       The pursuer’s averments, so far as material being unfounded in fact, the defender should be assoilzied from the conclusions of the Summons.

 

5.         The said chalet not being the property of the pursuer, the defender should be assoilzied from the conclusions of the Summons.

 

6.         Esto said chalet is the property of the pursuer (which is denied), she being bound by the defender’s authorisation to sever from said heritage and remove said chalet, the defender should be assoilzied from the second conclusion of the Summons.

 

7.         Upon the hypothesis, the pursuer being bound as set forth in the preceding pleas, the first conclusion is incompetent and should be dismissed as having no practical effect.”

 

[41]      There was an attempt by the defender to amend the pleadings in the course of submissions to introduce averments that the chalet was a trade fixture.  For the reasons given by Lord Brodie in paragraph 27, I agree that the application to amend should be refused. 

[42]      My reading of the pleadings is that the principal defence to interdict pled by the defender was that the chalet was his property and that no accession had occurred.  This defence inevitably must fail because of the concession made by counsel for the defender, immediately before proof, that the chalet has acceded to the heritable property owned by the pursuer.  I agree for the reasons given by Lord Brodie in paragraph 17 that the pursuer is entitled to declarator in the terms concluded for. 

[43]      The defender is therefore left to fall back on his alternative case.  The esto case is founded upon the provisions of the head lease and sub‑lease in particular Clause Fifteenth of the sub-lease and Clause Ninth of the head lease.  The defender avers that he “remains entitled to sever and remove the chalet from the heritage”.  The defender does not aver that he has any express or implied ownership rights of the chalet as a result of the provisions in the head lease or sub-lease or on any other basis. 

[44]      Taking into account the restriction in the appeal grounds by counsel for the pursuer and his concession that in principle a right of severance can be created by agreement, the disputed issues by the parties have narrowed and the decision turns on interpretation of the contractual provisions in the head lease and sub-lease and the implications thereof. 

[45]      I turn therefor to consider in more detail the relevant provisions of the head lease and sub-lease. 

 

Analysis
[46]      The starting point is Clause Ninth of the head lease which in my opinion places a duty on the tenants that: 

“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…”

 

I consider that this provision gives a right to the pursuer, as proprietor, to enforce removal of all buildings and works and obtain the return of the property in the condition in which it was received by the tenants.  I cannot interpret this as giving any right to the tenants to remove all or part of the buildings and works against the express wishes of the pursuer on or after the termination of the lease.  It is the pursuer, not the tenants, who can enforce this provision by specific implement if necessary.  I also note that neither in Clause Ninth or in any of the other provisions of the head lease is there any express provision giving ownership of the buildings and works to the tenants, if and when they are severed from the solum owned by the pursuer.   

[47]      Taking into account the provisions of the first clause of the head lease, I accept that it would be open to the tenants to include in the sub‑lease a clause equivalent to Clause Ninth of the head lease relative to removal of the chalet by the subtenant.   I do not consider however that Clause Fifteenth of the sub-lease is an equivalent clause to Clause Ninth of the head lease.  The duration of the head lease is specified in Clause Fifth which states that the lease shall endure to 1 March 2000.  Clause Second of the sub-lease has different provisions for the duration of the sub-lease and specifies various dates of termination with options to renew.  Clause Fifteenth of the sub-lease does not provide that the duty of the subtenant to exercise an option which includes the removal of the chalet at the subtenant’s own expense is to effect removal by the date of the termination of the head lease.  Clause Fifteenth of the sub-lease appears to allow the subtenant, at a date which may be after the expiry of the sub-lease and the head lease, to enter the property of the proprietor and remove part of his property at a time when neither the tenant or subtenant have any rights because both the head lease and sub-lease have terminated.  There is no obligation on the subtenant on removal to restore the site.  In addition there is no restriction on the option which would permit the option to be exercised only in circumstances where there was to be removal of all the buildings and works erected.  In my opinion, Clause Ninth of the head lease and Clause Fifteenth of the sub-lease are not consistent with each other.  To the extent that the defender seeks to assert a right to sever and remove the chalet, I am of the opinion that the defender, as subtenant, has no such right as the tenants who granted the sub-lease had no such right to transfer.

[48 ]     Even if I am wrong about the inconsistency, I am of the opinion that a proprietor, such as the pursuer, is entitled to refuse partial performance by the subtenant particularly in circumstances where there are no averments or proof that full performance at the termination of the head lease is offered by the tenants in terms of Clause Ninth. 

[49]      I accept in some circumstances where, for example, a proprietor and builder have agreed that the builder is obliged to demolish the proprietor’s house for a price and the proprietor then refuses to allow performance, that a breach of contract by the proprietor may arise as a result of the proprietor’s refusal.  In such circumstances the builder would be entitled to sue for damages.  But even in circumstances where there was such a breach of contract, I do not consider that the builder would be entitled, against the wishes of the proprietor, to enter his property and demolish the building if the proprietor objected.  The remedy for the builder is damages for breach of contract.  If the builder promised only partial performance, such as removal of the roof only, the builder may be in breach of contract and in such an event I consider that the proprietor would be entitled to refuse to permit partial performance. 

[50]      Turning to the rights and duties of the pursuer and the tenants under the head lease, I consider that the pursuer, as proprietor, would be entitled under the head lease to refuse performance by the tenants of the obligation in Clause Ninth of the head lease if that was offered.  The right to receive performance is created in favour of the proprietor and it is arguable by refusing or objecting to performance in whole or in part, the pursuer would merely be bringing the contract to an end without insisting on his right under Clause Ninth.  In such circumstances there is no breach of duty by the pursuer in refusing performance.  Even if refusal to allow performance amounted to a breach of contract by the pursuer, I do not consider that this would entitle the tenants to remove all buildings and works in the face of objection.  And if the tenants in this case had stated to the proprietor that they intended to remove only the chalet and not return the whole subjects to the lease in the condition in which they were received, the pursuer in my opinion would be entitled to refuse such partial performance. 

[51 ]     In view of my conclusions about the extent of the rights of the pursuer in relation to the tenants, under the head lease I cannot but conclude that the pursuer is well entitled to oppose the defender’s wishes as subtenant to remove the chalet which is owned by the pursuer some time after the head lease has ended.  I conclude that the pursuer owns the chalet;  that she is entitled to declarator as sought;  that the defender as subtenant has no right to remove and sever the chalet which is the property of the pursuer;  that the pursuer in this case is entitled to refuse performance by the defender as subtenant in full or in part without being in breach of contract;  and that even if the pursuer is in breach of contract, the remedy of the defender is damages not a right to remove and sever the chalet;  and that there is no contractual right or any other right at common law on which the subtenant founds to claim ownership, after severance, of the chalet.  In these circumstances, I consider the pursuer is entitled to protect her property rights by interdict where the defender, as subtenant, intends to dismantle the chalet and take it away when he does not own it. 

 

Conclusion
[52]      For these reasons therefore I would support the grant of declarator and interdict to the pursuer by upholding the second and third pleas-in-law for the pursuer and repel the pleas of the defender.