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APPEAL AGAINST A DECISION OF THE SCOTTISH LAND COURT BY THE TRUSTEES OF THE ROXBURGHE SECOND DISCRETIONARY TRUST AGAINST ROBIN DOUGLAS LINDSAY BATCHELOR [2023] ScotCS CSIH_41 (10 November 2023)
URL: http://www.bailii.org/scot/cases/ScotCS/2023/2023_CSIH_41.html
Cite as:
[2023] ScotCS CSIH_41,
[2023] CSIH 41
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FIRST DIVISION, INNER HOUSE, COURT OF SESSION
[2023] CSIH 41
XA22/23
Lord President
Lord Pentland
Lord Boyd of Duncansby
OPINION OF THE COURT
delivered by LORD CARLOWAY, the LORD PRESIDENT
in the appeal against a decision of the Scottish Land Court under section 88 of the
Agricultural Holdings (Scotland) Act 2003
in the cause
THE TRUSTEES OF THE ROXBURGHE SECOND DISCRETIONARY TRUST
Appellants
against
ROBIN DOUGLAS LINDSAY BATCHELOR
Respondent
____________
Appellants: Sutherland; Anderson Strathern LLP
Respondent: Frain-Bell; Blackadders
10 November 2023
Introduction
[1]
The appellants are the landlords of a farm at Easter Muirdean, Kelso. The
respondent is the tenant. The appellants contend that the respondent breached the terms of
his lease by failing to carry out repairs to fences. On 6 December 2021, the appellants served
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a notice to quit on the respondent, founding on this alleged breach. They applied to the
Land Court craving his removal.
[2]
On 12 April 2023 the Land Court granted decree of absolvitor. The appellants
challenge that decision. Two questions of law are posed: (1) whether the Land Court erred
in its construction of the respondent's repairing obligations under the lease; and (2) whether
the Land Court erred in determining that, if there were any ambiguity in the terms of the
obligation, business common sense supported the Court's construction.
The Conditions of Let
The Lease
[3]
The lease was entered into on 18 February 1983 by the appellants and the
respondent's father, namely Peter Batchelor. Under the heading "MAINTENANCE OF
FIXED EQUIPMENT", clause 6 provides:
"The Tenant shall pay to the Proprietor one-half of the cost of maintaining the fences,
gates and gateposts ... on the [farm]."
The lease states that it is subject to the Regulations and Conditions for the Let of Farms on
the Roxburghe Estates dated 21 August 1954.
The Regulations and Conditions
[4]
Regulation XXXVI reads:
"The Tenant shall enter into a formal Lease containing the above Conditions and any
other Conditions agreed on...".
Regulation VIII is as follows:
"The Tenant shall accept as being in a thorough state of repair the whole Fixed
Equipment (as the same is defined in Section 93(1) of the Agricultural Holdings
(Scotland) Act 1949) ... and the Proprietor hereby undertakes to have the said
defective equipment...put into a thorough state of repair as soon after the
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commencement of the Tenancy as is reasonably possible and the Tenant shall be
bound to maintain the Fixed Equipment as provided by Section 5(2)(b) of the said
Act."
The definition of "Fixed Equipment" in the 1949 Act includes "all permanent fences ...".
The obligation on a tenant under section 5(2)(b) of the Act is to maintain the equipment in as
good a state of repair as it was, once the landlord had put it into a "thorough state of repair",
at the commencement of the lease.
Facts
[5]
The original tenant, the respondent's late father, was the factor on the Roxburghe
Estates. The respondent succeeded to the tenancy upon his father's death. He intimated his
succession to the appellants on 26 January 2021. In response, on 8 March 2021, the present
factor, namely Roderick Jackson, wrote to the respondent. Among other things, his letter
said that repairs were needed to certain buildings and fences. A schedule of repairs was
enclosed. The court has not seen that schedule. The letter stated that the 1954 Deed of
Regulations governed the repairing obligations in relation to buildings. The respondent was
asked to provide a programme of works and to complete the building repairs by 1 October
2021.
[6]
The letter went on to say that, in terms of clause 6 of the lease, the respondent was
responsible for one half of the cost of maintaining the fences. A surveyor's report stated that
most of the necessary work was due to a failure to repair the strainer posts timeously. On
that basis, the appellants considered that the respondent should be wholly liable for the
costs of the repairs, other than the strainer posts. The appellants would arrange for the
works to be executed by a fencing contractor. On completion, they would invoice the
respondent for "your share of the cost".
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[7]
The respondent emailed the factor on 22 April 2021, stating that he would telephone
him to discuss the repairs. The appellants say that this phone call did not happen. This
prompted them, on 25 May 2021, to serve notice on the respondent, demanding that he
remedy "the undernoted breach" of the conditions of his tenancy within six months. The
appellants say that this notice superseded their offer to execute the works in the 8 March
letter.
[8]
By 6 December 2021, the repairs were still outstanding. The appellants served the
respondent with a notice to quit. It read:
"This notice is given in terms of section 22(2)(d) of the Agricultural Holdings
(Scotland) Act 1991 on the ground that you have failed to remedy a breach ... of a
term or condition of your tenancy ... namely your failure to repair items of fixed
equipment as set out in the Schedule of Repairs to the buildings and fences ... issued
to you by recorded delivery letter dated 8 March 2021 issued on behalf of the
landlords, which Schedule was annexed to the notice requiring you to remedy dated
25 May 2021."
[9]
The respondent disputed that he is in breach of the lease. He accepted that certain
repairs were required, and that he has to pay half of the cost. He did not accept that this
amounted to an obligation to carry out the works. He relied upon the terms of the letter of
8 March and clause 6 of the lease. In addition, at the time of the notice to quit, there was a
dispute between the parties about the extent of the subjects. The respondent did not accept
that the buildings which required repair formed part of his holding. That matter was
resolved in his favour at an arbitration on 8 September 2022. It is no longer in issue.
The Land Court's decision
[10]
The Land Court noted that the principles governing the construction of contracts
were well-established. The contract must be interpreted as a whole. The intention of the
5
parties required to be ascertained by considering what a reasonable person, having the
background knowledge of the parties, would understand from the language selected. If
there were two possible constructions, the court was entitled to prefer the one which was
more consistent with business common sense (Network Rail Infrastructure v Fern Trustee 1
[11]
Neither party argued that evidence was required in order to interpret the lease.
There were no averments of relevant surrounding facts and circumstances, other than that
the previous tenant had been the factor on the estate. It was not open to the court to have
regard to the terms of the letter of 8 March 2021 in order to assist in interpreting the lease.
The letter did not demonstrate that the present factor had adopted the respondent's
interpretation of clause 6. Even if it had, that did not mean that his interpretation was
correct. Apart from the one averment about the factor, the court had nothing to rely on but
the ordinary and natural meaning of the language.
[12]
Both clause 6 and Regulation VIII were clear, when looked at in isolation. The issue
was how they interrelated. Regulation XXXVI made it clear that the Regulations were
applicable to all of the tenancies on the Roxburghe Estates. They did not exclude the
possibility that other conditions could be agreed, including those which diverged from the
Regulations. The landlord was to provide the fixed equipment in a thorough state of repair.
The obligation to maintain that equipment was on the tenant. For whatever reason, the
parties had chosen to make special provision in relation to the maintenance of the fences, the
gates and gateposts.
[13]
The appellants could not provide a satisfactory explanation for the respondent
paying them half of the cost of maintenance when, on their interpretation, it was the tenant's
responsibility to carry out that maintenance. The appellants had tried to explain that the
6
tenant would give any invoices to the appellants to settle, along with half of the costs. This
did not make sense. Clause 6 could not be construed as a concession that the appellants
would pay one-half of the cost of maintenance; that was the direct opposite of what the
clause expressly provided. It was not argued that clause 6 could be interpreted as though
the words "Tenant" and "Proprietor" had been exchanged.
[14]
There was no ambiguity. The appellants had not demonstrated that there was a
basis for identifying a rival meaning (Arnold v Britton [2015] AC 1619 at para 77). The only
tenable interpretation of clause 6 was that the obligation on the respondent was limited to
paying to the appellants' half of the cost. It was a necessary corollary of the payment
obligation that the maintenance would be done by the party receiving payment; ie the
appellants. Clause 6 and Regulations VIII were not in conflict. This was simply an example
of the general (the Regulations) yielding to the particular (the lease). Regulation XXXVI
allowed for such an outcome.
[15]
Even if the court had identified an ambiguity, the respondent's position was more
consistent with business common sense. Ordinarily, routine and minor maintenance work
on a small farm would be carried out by the tenant. However, once it was appreciated that
the tenant was the factor on a large estate, of which the holding formed a part, the "probable
reason for the somewhat unusual nature of the contractual arrangements pertaining to the
fences ... become (sic) obvious". The estate would have workers and contractors who might
assist the factor with repairs. The parties would have:
"had some incentive to agree to an arrangement whereby the [appellants] effected
the maintenance work to the fences, ... when the need arose and this had been
brought to [the appellants'] attention by the tenant and the tenant would defray part
of the cost to the [appellants] of so doing."
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As a specialist court, the court's experience led it to conclude that such an eminently
practical and mutually beneficial arrangement was what clause 6 was intended to achieve.
Submissions
The appellants
[16]
The principles governing the construction of a lease were not in dispute. The court's
task was to ascertain the objective meaning of the language used. The contract had to be
considered as a whole. Where there were rival meanings, the court could reach a
construction that was more consistent with business common sense (Wood v Capita Insurance
[17]
The Land Court failed to adopt the proper approach to construction. It did not look
at the lease, which included Regulation VIII, as a whole. The Court stated that the two
provisions were clear in their terms when looked at in isolation. The issue was whether
clause 6 overrode Regulation VIII. The Court failed to consider whether the two provisions
could both have effect when read together.
[18]
The Land Court erred in holding that the only possible interpretation of clause 6 was
that the respondent's obligations were limited to paying to the appellants half of the cost of
maintenance. That was not what clause 6 said. Clause 6 did not have any effect on the
respondent's obligation under Regulation VIII. It concerned only the sharing of the cost of
repair. Regulation VIII governed the respondent's obligation to repair. If the appellants
were responsible for carrying out the maintenance of fences, gates and gateposts, but not
any other types of fixed equipment, this would have been expressly stated. There was no
obvious benefit in making the appellants responsible for repairs of some items, when the
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respondent was responsible for all other fixed equipment. The respondent was best placed
to see when a repair might be required.
[19]
The Land Court's reasoning, that the original contracting parties had an incentive to
agree to a variation in the obligations under Regulation VIII, amounted to an exercise in
speculation. The Court was entitled to take into account its specialist knowledge of the
applicable law, and its agricultural member's knowledge of agricultural practice. However,
the intention behind clause 6, and its relationship with Regulation VIII, was not a matter to
be determined by reference to specialist knowledge of agricultural practice.
The respondent
[20]
The Land Court's decision was clear. There was no error in law. The case fell to be
determined according to the well-established rules on the interpretation of contracts. The
parties' intention was most obviously gleaned from the language used. Contracts were
made by what people said, not what they thought in their inmost minds (Lagan Construction
[21]
The Land Court had not erred in finding that the only tenable interpretation of
clause 6 was that the respondent's obligation, in relation to the repair of fences etc., was
limited to paying to the appellants half of the associated cost. It was a necessary corollary of
that payment obligation that the appellants would carry out the maintenance, as the party
entitled to receive payment for so doing. There was no ambiguity. There was no conflict
between clause 6 and Regulation VIII. Regulation XXXVI made it clear that the parties were
entitled to agree upon "any other Conditions". Clause 6 was one such "other Condition".
The Land Court was entitled to conclude that there was no basis in the language used, or in
the factual matrix, for identifying a rival meaning for clause 6. As there was no ambiguity,
9
there was no basis upon which to use any other aid to construction (Lagan Construction
Group at para [11]).
[22]
If there were an ambiguity, the respondent's position was more consistent with
business common sense. When a tenant was the factor and knew that estate workers or
established contractors were available to assist with maintenance tasks, different
considerations were likely to apply, distinct from the usual arrangement whereby the tenant
was considered to be best placed to maintain fixed equipment. The original contracting
parties would have had some incentive to agree that the appellants effected the maintenance
and the tenant reimbursed them. The court should be reluctant to interfere with the findings
of a specialist court (El-Huseini v General Medical Council [2021] EWHC 2022 at paras 70-71).
Decision
[23]
The terms of the lease, and the incorporated Regulations and Conditions, fall to be
construed according to the well-established rules on the interpretation of contracts. These
were recently set out in summary in Lagan Construction Group v Scot Roads Partnership Project
[2023] CSIH 28 (LP (Carloway), delivering the opinion of the court, at para [10]) citing
Paterson v Angelline (Scotland) 2022 SC 240 (at para [32]) in turn citing, inter alia, Arnold v
Britton [2015] AC 1619 (Lord Neuberger at para 15). The intention of the parties is most
obviously gleaned from the language which they have chosen to use in the context of the
contract as a whole. The court should not normally search for drafting infelicities in order to
justify a departure from the natural meaning of that language. It should identify what the
parties agreed, not what it thinks common sense may otherwise have dictated. Contracts are
made by what people say, not what they think in their inmost minds (Muirhead & Turnbull v
10
[24]
Regulation VIII is to the effect that the tenants on the Roxburghe Estates accept the
fixed equipment, including the fences, in a thorough state of repair. They then become liable
to maintain the fences in as good a state of repair as they were at the start of the tenancy
(Agricultural Holdings (Scotland Act 1949) s 5(2)). That then is the general position, but it is
possible to modify it (ibid s 5(3)).
[25]
In this lease, clause 6 provides that the respondent is to pay to the appellants one half
of the cost of maintaining the fences. How, then, does that fit in with the provision of
Regulation VIII which applies to all the Roxburghe Estate leases? It is certainly different
from it. The intention must have been to modify it, as is permitted by Regulation XXXVI.
That is clear also from the preamble to the lease, where express reference is made to the
tenant taking the lease "at the rent and under the following conditions". The phraseology of
clause 6, in imposing an obligation on the respondent to pay one half of the costs,
presupposes that the appellants have already incurred a cost in relation to fence
maintenance. That in turn must mean that it was intended that the maintenance would have
been instructed, or carried out, by the appellants. Put another way, as the Land Court
determined (para [32]), the obligation on the respondent is limited to paying to the
appellants the costs of maintenance. It is a necessary corollary of that payment obligation
that the maintaining itself is to be done by the party to whom the respondent is directed to
make payment, namely the appellants. The appellants' construction makes no sense since it
would oblige the respondent not only to maintain the fences, gates and gateposts, but also to
pay the appellants one-half of the costs of doing so.
[26]
The appeal is refused on this basis. The court will answer the two questions in the
negative and affirm the order of the Land Court dated 12 April 2023.
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[27]
It is not necessary to ascertain what business, in the sense of farming, common sense
might have dictated. Nevertheless, the language does have to be interpreted against the
background of the parties' agreed common knowledge at the time the lease was entered into
(Network Rail Infrastructure v Fern Trustee 1 2022 SLT 997, LP (Carloway), delivering the
opinion of the court, at para [28]; Wood v Capita Insurance Services [2017] AC 1173, Lord
Hodge at para 10). The peculiarity of clause 6 in this lease was that, at the time of the lease,
the tenant was also the factor on the estate. Although this may not involve specialist
knowledge, it does provide an explanation for the divergence from the norm. The parties
had agreed that the cost of maintenance was to be divided, rather than imposed solely on
the tenant. Since the appellants already had their own estate workers and established
contractors in situ, it was easier for the appellants to instruct (and control) the work and then
to charge the respondent for his agreed half share.
