Scottish High Court of Justiciary Decisons

[2] As appears from the sheriff's findings in fact, the lands which are the subject of the dispute include a number of fields designated in a Scottish Office Agricultural, Fisheries and Environmental Departmental Plan. The whole lands were bought by the first respondents in 1983. A certain part, amounting to approximately 6 acres and including three of the fields, was purchased by the second respondents from the first respondents in 1996.

[3] After proof the sheriff held that the appellant had failed to prove that he was a tenant in terms of the 1949 Act and that he had not proved that he was entitled to open and peaceful possession of the lands of Backhill Croft of Overbrae. He also held that the appellant had failed to establish his case on interdict and with it the claim for damages. Before this court no argument was addressed to the matter of damages.

[4] The material issue in the appeal was whether the sheriff was well founded in his determination that the appellant had failed to establish the essential foundation of his case, namely, that any occupation by him of the lands was derived from a lease of those lands to him by the first respondents, which lease constituted an agricultural lease in terms of the 1949 Act, now the 1991 Act.

[5] The appellant, who appeared on his own behalf, spoke to certain of the submissions which were contained in a document which he placed before us. Some part of the submissions he made were addressed to the nature of the lands now comprising Backhill Croft of Overbrae. But there was no dispute before us that, if made the subjects of a lease, these lands, notwithstanding that they comprised part arable and part non-arable land, were capable of constituting an agricultural tenancy, as the sheriff had held in his judgment. The sheriff, however, identified as the first and essential question to be addressed as being whether the appellant and the first respondents had entered into a lease. In our opinion, he was correct to do so.

[6] On this matter, the submissions of the appellant started from the proposition that while a lease was a contract and parties to a contract were free to make any bargain that they liked, nevertheless the relevant legislation was intended to secure the rights of a tenant of an agricultural holding to security of tenure and to compensation on outgoing and that a court should be astute to detect and frustrate sham devices and artificial transactions whose only object was to disguise the grant of a tenancy and to evade the security intended to be given by statute. Thus, if the purpose specified in an agreement was a sham and the tenant was allowed to effect full husbandry, then the court could look behind the wording of the agreement. Alternatively, the original purpose of the agreement between them may have been varied by the subsequent actings of the parties and an agricultural tenancy may have been brought into existence. Reference was made to Johnston v. Moreton 1980 AC 37, Featherston v. Staples 1986 1 WLR 861 and Street v. Mountford 1985 AC 809 (and especially the speech of Lord Templeman at p. 825H). If the purpose of an agreement was shown to be a sham and the person occupying the lands was allowed to effect full husbandry of the subjects, then the court was entitled to determine that the true purpose of the agreement was the grant of a lease of an agricultural holding. Reference was made to A.G. Securities v. Vaughan 1990 1 AC 417. The appellant also made reference to the definition section of the 1949 Act, section 93, for the wide meaning of agricultural activity, and also to the provisions of sections 1 and 2 of that Act in relation to the expression "agricultural land". Likewise he pointed to the definitions of the expressions "landlord" and "tenant", in the latter case the definition being that of "the holder of land under a lease". That lease might be constituted by express contract or by a contract implied from possession and payment of rent. Thus a verbal lease, in the absence of an agreed term for more than a year, was deemed to be a lease for the year and was continued for year to year by tacit relocation until duly terminated by notice under the relevant statute. Reference was made to Morrison Low v. Paterson 1985 SLT 255 (and especially to the passage in the speech of Lord Keith at p. 268 (1^st col.) cited in the sheriff's judgment) and to Strachan v. Robertson-Couper 1989 SC 130.

[7] Against this background the appellant turned to the circumstances of the present action. He submitted that they were such as point to the creation of an agricultural tenancy from year to year by virtue of a verbal agreement between himself and the first respondents. His submissions before us included the following statements:

First,

Second

[8] We observe, however, that this appeal must be determined on the findings in fact which were made by the sheriff who heard the evidence and, in particular, saw and heard the important witnesses and was in a position to gauge the credibility and reliability of the evidence given before him. It was not in dispute that there was no written document which embodied any agreement between the parties.

[9] Before the sheriff and again before us, it was argued for the appellant that there had been neither renunciation of the agricultural holding nor notice to quit served on the appellant and thus the holding must be deemed to continue to exist. Reference was made to Morrison v. Randall 1986 SC 89. But this factor can only be relevant where it is already established that a lease of an agricultural holding has been created.

[10] In the course of his submissions to this court the appellant appeared to accept without demur the sheriff's statement that, as there was no writing of any significance supporting the constitution of any lease in the present case, the issue of the existence or otherwise of a lease had to be determined on the direct evidence of the parties involved and by reference to their actings. Nor did the appellant appear to demur from the sheriff's statement that the distinction between what was arable and what was non-arable land, in reference to an agricultural holding, did have some relevance in determining the issue of whether or not there had been consensus as to the subjects which had allegedly been leased in the first place. Nor did the appellant take issue with the sheriff's statement that the four essential requirements to constitute a lease were that there was consensus on the parties, the subjects, the rent and the term. Indeed this phraseology was adopted in his written submissions. The sheriff observed that there was no dispute that the property was heritable and the parties were separate and capax. He continued as follows:

[11] In this regard it is important to note that the sheriff who saw and heard the witnesses led at the proof, stated that only the appellant and the first respondents could give direct evidence of "the actions from 1984 onwards which may give rise to the conclusion that there was a lease established". On the evidence which he heard the sheriff made certain specific findings in fact. In doing so, the sheriff took into account his determination on matters of credibility and reliability. Thus on the matter of how the appellant came to take occupation at all, the sheriff preferred the evidence of the first respondents to that of the appellant. He also observed that it was a consistent feature of the evidence that words such as "tenancy" and "lease" were used very imprecisely. On the matter of an agreement on rent, the sheriff observed that on the appellant's own evidence there was no agreement on rent and that the rent was infinitely variable and at his option. After considering the evidence related to this matter, including the terms of a letter dated 26 February 1986, the sheriff concluded that the weight of evidence favoured the appellant's contention that there was in fact no enforceable agreement on rent and that there was simply an understanding that he would contribute a reasonable sum, depending on the amount he made from use of the first respondents' fields. The sheriff also went on to observe that, looking at the matter from a different angle, it seemed clear that the first respondent, Mr. Khosla, did not consider that he ever had an enforceable right against the appellant whereby he could have sued him for payment of rent calculated on the basis which the appellant had accepted was the agreed way of calculating the rent. The sheriff then observed that it was possible that Mr. Khosla could have had a right which he expressed no intention of enforcing but that as the appellant denied Mr. Khosla's formula for calculating rent, it seemed clear that there was no consensus at all between the parties as to what payments should be made by the appellant to the first respondents. After a reference to a passage from the opinion of Lord President Emslie in Strachan v. Robertson-Couper at p. 490, the sheriff said this:

The appellant did not attempt to controvert these findings except to the extent of making the allegedly factual statements which we have cited above. In his grounds of appeal he asserted, amongst other things, that the rent payable was agreed between him and the first defenders. However, neither these statements nor the assertion as to the rent will stand against the sheriff's determination on the evidence or the findings in fact derived from that evidence.

[12] The salient findings in fact in summary set out that in 1983 the first respondents, Mr. and Mrs. Khosla, had purchased the whole of Backhill Croft of Overbrae with the intention their son should farm it. However in 1984 their son decided that the future lay in organic farming and he decided to return to college to study agriculture, horticulture and, in particular, organic farming. This required that the ground should lie fallow for a period of five years or so. At this time Mrs. Khosla became friendly with the then wife of the appellant. Through this friendship the appellant learnt that Mrs. Khosla and her son were returning to Cambridge for a period. The appellant approached the first respondents and offered to rent the first respondents' ground and to keep it in good condition. Some thirty eight and a half acres of the first respondents' property were arable, the rest being rough ground. The first respondents agreed that the appellant could occupy the arable ground and they understood that the appellant would pay for the use of the ground. In particular, the first respondents understood that the appellant would pay £100 per acre for the area on which potatoes were grown and £33 per acre for the area on which oats were grown. There was no agreement as to when the appellant would commence occupation but the appellant entered "some of the fields" shortly after the first respondents and their son returned to Cambridge in the autumn of 1984. In finding 11 the sheriff found as a fact that the respondents had informed the appellant of their intention to use the ground for organic farming but agreed that they would give him two years' notice of whenever they were going to return. The sheriff found as a fact (finding 17) that in about 1984 the appellant asked the first respondents for a written lease which the first respondents declined to give him. The first respondents were not interested in entering into a lease or receiving a return. They were content to allow the land to be used by the appellant and to receive payment from him of whatever crop use he made of the land. The sheriff further found as a fact (findings 12 and 13) that in 1988 the first respondents advised the appellant that they would be returning and invited the appellant to vacate whatever fields he was using. In about 1988 some four fields were under cultivation. In 1989 one of those four fields was under cultivation. In 1990 another of those four fields was in cultivation by the appellant. Five other fields were at no stage subject to any cultivar activity by the appellant. The sheriff specifically found as a fact that "there was no sum agreed between the parties which the (appellant) would pay by way of rent. In February 1986 the (first respondents) wrote to the appellant confirming that they would accept whatever the (appellant) 'can happily pay'". The sheriff, in findings 14 and 15, set out the various payments made by the appellant to the first respondents over the period from August 1984 until March 1989. These payments were made at various different dates and of differing sums. In particular the sums declined between 1988 and 1989 from three payments of £350 in 1988 to three payments of £200 in 1989. From March 1990 onwards the first respondents' agents had been sent cheques by the appellant for a sum of £500 purporting to be by way of rent but these cheques had not been cashed. In 1991 the first respondents raised an action against the appellant to interdict him from using the fields of Backhill Croft.

[13] Before the sheriff and again before us, the argument for the appellant was predicated upon the basis that because the appellant admittedly had occupied certain of the fields and had taken crops off them and because the appellant admittedly had made payments to the first respondents for that occupation, the agreement between the parties was one which could only constitute a lease and hence an agricultural tenancy which extended to the whole of the lands owned by the first respondents, including the area sold by the first respondents to the second respondents in 1996. It is pertinent to note the sheriff found that from 1985 the appellant had made returns to the Department of Agriculture and Fisheries in which he purported to be occupier of the whole of Backhill Croft but he did not inform the first respondents that he was making such returns and the first respondents were wholly unaware of any such returns having been made by the appellant.

[14] In this regard the sheriff noted that as between the appellant and the first respondents no term of years was specified at any stage and that there was neither entry specified nor ish. He accepted that it was beyond doubt that there should be occupation of at least some of the fields for an indeterminate period. But he observed that the extent of the occupation varied from year to year and that it seemed latterly to be little more than token occupation. He regarded the decreasing use and latterly the use of only ten per cent of the whole land as a factor to be taken into account when seeking to discern the nature of the consensus between the parties. In our opinion, it cannot be said that this was not a proper factor to take into account, along with the other circumstances including the nature of the payments made, to which the sheriff alludes in his note, in determining what was the nature of the relationship between the appellant and the first respondents.

[15] The conclusion of the sheriff on the evidence is explained in a passage in his note where he said:

In what follows this passage the sheriff noted that there was nothing in the evidence to indicate that Mr. Khosla had any intention of excluding himself from the use of any part of the land, which intention would be an essential element of the relationship of landlord/tenant. The sheriff then expressed the view that the intention of parties was to be determined objectively and, as such, it was an inference to be gleaned from all the available evidence and not restricted to an inference from the fact of occupation and the fact of offer of payment. He declined to accept the submission for the appellant that because there had been occupation and payments of money, there was a presumption that there was a lease. He refused to draw that conclusion because as he said, "the occupation is equally consistent with licence to use". He found nothing in the nature of the possession in the case that showed any indication that "the real intention of parties was to create the relationship of landlord/tenant as opposed to licensor/licensee". As the sheriff put it, the appellant required to prove more than occupation and more than remittances of varying amounts to reach a conclusion that a contract of lease was entered into.

[16] In our opinion, the sheriff, on the evidence which he accepted and the findings in fact derived from the evidence, was fully entitled to reach the conclusion that he did, namely that the arrangement between the parties was not a lease, in particular, because the consideration paid for possession and use of the fields by the appellant was not of the nature of rent. In reaching that conclusion the sheriff was entitled to have regard to the whole circumstances in determining what was the intention of parties. In doing so he was entitled to reject the appellant's evidence that there was a lease, that he had been entitled to, and had in fact continued in, occupation of the lands after 1991 on the basis of tacit relocation and that he had continued to pay rent ever since he took occupation.

[17] For the above reasons, we consider that the appellant has failed to establish that the sheriff erred in any respect, either in fact or in law, in reaching his decision to assoilzie the respondents. Accordingly we shall refuse the appeal and adhere to the sheriff's interlocutor.