LADYKIRK ESTATES Ltd, a Borders ‘Land Agent’ company has spectacularly lost a legal challenge in the Land Court over objections to the transfer of a farm tenancy from an elderly tenant to his younger nephew. Ladykirk had also claimed their ECHR rights had been in breach, which the Land Court held not to be the case.
Alarmingly for some, it has been noted that among the directors of Ladykirk Estsates Ltd is one Andrew P Penman, a solicitor with Stormonth Darling Solicitors based in the Scottish Borders town of Kelso. Penman was judged so unfit to practice by a Law Society of Scotland investigating solicitor team who recommended he be prosecuted for offences involving the deception of high street banks such as the Royal Bank of Scotland & also an apparent deception of Her Majesty’s Revenue & Customs over a well reported scandal involving a deceased estate.
The ruling from the Land Court : FLEMING v LADYKIRK ESTATES LTD. (Application RN SLC/62/08 – Order of 28 April 2009)
THE COURT
(Lord McGhie, D J Houston)
FLEMING v LADYKIRK ESTATES LTD.
(Application RN SLC/62/08 – Order of 28 April 2009)
AGRICULTURAL HOLDINGS – ASSIGNATION OF TENANCY – WITHHOLDING CONSENT – REASONABLE GROUNDS FOR REFUSAL – DEEMED CONSENT – RIGHT TO ASSUME CONSENT – PRACTICAL PROCEDURES – ONUS ON LANDLORDS – ECHR – DISPROPORTIONATE PROVISIONS – ADEQUACY OF NOTICE – COVERING LETTER – “PARTICULARS” – COLLATERAL REASONS – REASONS INCONSISTENT WITH INTENTION OF PARLIAMENT – AGRICULTURAL HOLDINGS (SCOTLAND) ACT 1991 SECTION 10A, SECTION 25 – AGRICULTURAL HOLDINGS (SCOTLAND) ACT 2003 SECTION 66.
The elderly bachelor tenant of a holding gave notice of an intimation to assign his tenancy to a nephew. He did so by a formal notice enclosed with a letter which gave brief details of the proposed assignee, expressing an assumption that the assignee was known to the landlord. It offered to provide further particulars on request. The landlords intimated that they were withholding consent and set out various grounds. The applicant contended that the stated grounds were unreasonable and that, as the landlords had intimated no reasonable grounds for refusal, they should be taken to have consented. The tenant assigned the lease on that assumption. An application was made to the Court by the assignee based on section 10A Agricultural Holdings (Scotland) Act 1991. Various bases of opposition were advanced. The landlords objected to the form of the intimation. They contended that where grounds for withholding consent had been intimated, the tenant could not assume that the assignation was valid. The main substantive ground was that assignation would deprive the landlords of their expectation of recovering the tenancy on death under the provisions of section 25 of the 1991 Act. The new provisions of section 10A were a significant interference with the landlords’ existing rights. This was disproportionate and a potential breach of Article 1 of the First Protocol of ECHR. The Court could and should read the provisions so as to avoid that breach. If it would not do so, it should continue the cause to allow the matter to be addressed as a devolution issue.
HELD that (1) although the provisions of Article 1 were engaged, the Court was not satisfied that the new provision was disproportionate having regard to the purpose of the legislation; (2) there was no reason to depart from the decision in Luss Estates Ltd v Sturgeon; (3) where a landlord withheld consent unreasonably the tenant could assume that consent had been granted; (4) the covering letter could be read along with the document which the tenant appeared to have contemplated as the formal notice; (5) by the use of the word “particulars” Parliament intended simply to require sufficient detail to identify the person involved and show why that person was said to fall within the class of persons specified in subsection (1); (6) the onus was on the landlords to establish their grounds but reasonableness was to be viewed from the landlords’ perspective; (7) a desire by a landlord to preserve his rights to bring the lease to an end cannot necessarily be regarded as collateral to the lease but the fact that the operation of the new provision would have the effect of removing the landlord’s rights under section 25 was such an obvious consequence that it must be assumed that Parliament intended the legislation to have that effect, it followed that it could not be reasonable for a landlord to pray in aid such consequences as a ground for refusal of consent;
OBSERVED: The Court made various observations as to how the new provisions could be made to work in practice if parties co-operated in exchanging necessary information.
The Note appended to the Court’s Order is as follows:-
Note
[1] This is an application based on section 10A of the Agricultural Holdings (Scotland) Act 1991 as amended by section 66 of the Agricultural Holdings (Scotland) Act 2003. The tenant gave notice of an intention to assign his tenancy. The landlords intimated that they were withholding consent and set out various grounds. The applicant contended that the stated grounds were unreasonable and that, as the landlords had intimated no reasonable grounds for refusal, they should be taken to have consented. The tenant assigned the lease on that assumption.
[2] We heard parties at debate on 17 and 18 February 2009. Mr Gordon Reid, QC, and Mr Pino Di Emidio, advocate, appeared for the applicant and Sir Crispin Agnew, QC, for the landlords.
Authorities
A v The Scottish Ministers 2001 SC 1
Adams v The Scottish Ministers 2003 SC 171
Ambatielos v Anton Jurgens [1923] A.C. 175
Austin v London Borough of Southwark [2009] EWCA Civ66
Barns-Graham v Lamont 1971 SC 170
Bromley Park Garden Estates Ltd v Moss [1982] 1 WLR 1019
Burgerking Ltd v Rachel Charitable Trust 2006 SLT 224
Canadian Pacific Railways v Canadian SS Lines Ltd [1945] AC 204
Cayzer v Hamilton (No. 1) 1996 SLT (Land Ct) 18
Davie v Trustees of the Countess of Sutherland’s No..3 Settlement 2005 SLCR 137
Gray v Crofters Commission 1980 SLT (Land Ct) 2
Immobiliare Saffi v Italey [1999] ECHR 55
International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] Ch
James v UK (1986) 8 EHRR 123
Jurgens Margarine Works [1923] AC 183
Kopecki v SlovakiaECtHR 28 September 2004
Lousada & Co Ltd v J E Lesser Properties Ltd 1990 SC 170
Luss Estates Co v Sturgeon 2006 SLCR (1) 96
Mackay v Dick and Stevenson (1881) 8R (H.L.) 37
Maurice v FranceECtHR 6 October 2005
Mellacher v Austria(1989) 12 EHRR 391
National & Provincial Building Society v United Kingdom [1977] STC 1466
Poplar Housing and Regeneration Community Ass. Ltd v Donoghue [2002] QB 48
Renfrew District Council v AB Leisure (Renfrew) Ltd 1988 SLT 635
Scotmore Developments Ltd v Anderton 1996 SC 368
Scottish Tourist Board v Deanpark Ltd 1998 SLT 1121
Simpson v Henderson 1944 SC 365
Spadea & Scalabrino v Italy [1995] ECHR 35
Vontas and Others v Greece ECtHR 5 February 2009
Wilson v First County Trust Ltd No. 2 (1984) AC 816
Textbooks
Stair Encyclopaedia of the Laws of Scotland
The Scottish Parliament Information Centre Briefing (“SPICe”) 03/17
Article – Assignations (1983)28 JLSS 371
Cross Statutory Interpretation 3rd Ed.
Paton and Cameron, Landlord and Tenant
Statutory material
Agricultural Holdings (Scotland) Act 1991
Agricultural Holdings (Scotland) Act 2003
Section 10A of the 1991 Act as added by section 66 of the 2003 Act is in the following terms:
“10A Assignation and subletting of tenancy
(1) A lease of an agricultural holding may be assigned by the tenant to any of the persons who would be entitled to succeed to his estate on intestacy by virtue of the Succession (Scotland) Act 1964 (c.41) if, following notice under subsection (2), the landlord consents to a proposed assignation.
(2) The tenant must give the landlord a notice in writing of any intention of the tenant to assign the lease; and the notice must include the particulars of the proposed assignee, the terms upon which the assignation is to be made and the date on which it is to take effect.
(3) The landlord may withhold consent to the proposed assignation if there are reasonable grounds for doing so; and, in particular the landlord may withhold consent if not satisfied that the proposed assignee –
(a) would have the ability to pay –
(i) the rent due under the lease; or
(ii) for adequate maintenance of the land; or
(b) has the skills or experience that would be required properly to manage and maintain the land in accordance with the rules of good husbandry.
(4) Any such withholding of consent (and the grounds for withholding it) is to be intimated in writing to the tenant within 30 days of the giving of the notice under subsection (2); and, if no such intimation is made, the landlord is deemed to have consented to the proposed assignation.
(5) Any term of a lease or of an agreement between the landlord and tenant which purports to provide that the lease of an agricultural holding may not be assigned under this section shall, in so far as it so purports, be null and void.”
[3] Another statutory provision referred to at debate was section 25. It is unnecessary for us to set out the terms of that section. There was no dispute that the effect was that where a tenant died without near relatives, the landlord would have an unqualified right to give a notice to quit to any person to whom the lease was transferred. The lease would accordingly be at an end and the landlord would be entitled to vacant possession. For the purposes of the Act “near relatives” meant a spouse or children, including adopted children. A landlord’s right to give notice to quit to a near relative was a qualified right. In the debate, the persons other than “near relatives” to whom a lease might be transferred on death were referred to for convenience as the “intestate successors”. This class is defined by reference to the Succession (Scotland) Act 1964 and for present purposes can be taken to be the same for the purposes of section 10A and section 25 - although, in fact, the class covered by section 25 is slightly larger in that it includes sons-in-law and daughters-in-law.
Background circumstances
[4] Robert Fleming was tenant of the farm of Ladykirkshiels, Coldstream. (For convenience we continue to refer to him as the tenant. This, of course, is without prejudice to the applicant’s contention that he is now the tenant.) By letter of 4 August 2005 he gave notice to his landlords in terms of section 10A(2). After setting out formal details of the lease and the statutory provisions, the letter narrated that:
“Robert Fleming intends to assign his interest as Tenant under the said Lease to his nephew, James Forrest Fleming, Sucklawridge, Smailholm, Yetolm, Roxburghshire for no consideration and to take effect as at 1 October 2005”.
The letter was enclosed with another letter of the same date in the following terms:
“We refer to the above and now enclose formal Notice of our client’s intention to assign his interest as Tenant of Ladykirkshiels, Coldstream, Berwickshire to his nephew, James Forrest Fleming and we would be obliged by you kindly acknowledging receipt. As you may be aware, Mr J F Fleming has been farming for a considerable number of years and is of sound financial standing. However, we shall be pleased to provide any further details which you may require. In the meantime, would you please acknowledge receipt of the formal Notice.”
[5] By letter dated 1 September 2005 the agents for the landlord intimated that the landlord withheld his consent and set out the grounds for this as follows:
[1. The landlord has no information about the proposed assignee which would allow the Landlord to be satisfied that the proposed assignee has the ability to pay (i) the rent due under the Lease or (ii) for adequate maintenance of the holding.
[2. The landlord has no information about the proposed assignee which would allow the Landlord to be satisfied that the proposed assignee has the skill or experience that would be required to properly manage and maintain the holding in accordance with the Rules of Good Husbandry.
3. In terms of Section 10A(1) of the Agricultural Holdings (Scotland) Act 1991 as provided for in terms of Section 66 of the Agricultural Holdings (Scotland) Act 2003 “a Lease of an agricultural holding may be assigned by the tenant to any of the persons who would be entitled to succeed to his estate on his intestacy by virtue of the Succession (Scotland) Act 1964”. The Landlord has no information to enable him to be satisfied that the proposed assignee is one of the persons who would be entitled to succeed to the Tenant’s estate on intestacy. Furthermore given that the identify of those persons entitled to succeed to the Tenant’s estate on intestacy can only be identified at the time of the Tenant’s death the Tenant will be unable to produce such evidence as would satisfy the Landlord with regard to the foresaid matters.
4. The Lease contains provision that the Tenant binds and obliges himself “to reside personally upon the Farm and occupy the Farm House”. In terms of Section 16(A) of the Agricultural Holdings (Scotland) Act 1991 as provided for in Section 65 of the Agricultural Holdings (Scotland) Act 2003 there is in place of the foregoing provision “deemed to be incorporated in the Lease an undertaking by the Tenant that he will if he does not reside on the holding ensure that a person who has the skills and experience necessary to farm the holding in accordance with the Rules of Good Husbandry resides on the holding”. The Landlord has no information to enable him to be satisfied that the foregoing provisions will be complied with.
5. Notwithstanding the provisions of Section 10(A) of the Agricultural Holdings (Scotland) Act 1991 as aforesaid the Lease contains provision that assignees are excluded. In terms of Minute of Agreement between the Landlord (on the one part) and Daniel Fleming, Forrest Fleming and the Tenant (on the other part) dated 18th and 22nd February in the year 1944 and Minute of Agreement between Forrest Fleming and the Tenant (on the one part) and the Landlords (on the other part) dated 29th May and 5th June both months in the year 1962 the Tenant accepted the exclusion of assignees and as such it is reasonable that the Landlord should withhold consent to the proposed assignation.
6. It is understood that the proposed assignee is either the Tenant or the owner/occupier of Sucklawridge Farm, Kelso. It is further understood that the proposed assignee is a nephew of the Tenant. In the absence of any near relative of the Tenant (as defined in Part III of Schedule 2 to the Agricultural Holdings (Scotland) Act 1991) it is a reasonable expectation of the Landlord that on the death of the Tenant the Landlord will be able to obtain vacant possession of the holding by the service an incontestable notice to quit under Section 25 of the Agricultural Holdings (Scotland) Act 1991 or otherwise.
7. The holding is of insufficient size in the present farming climate to justify being let as a separate holding. It is believed that the proposed assignee would only wish the assignation in order to increase the size of his present farming operation. it is unreasonable that the Landlord should consent to an assignation which would continue the tenancy of the holding for a further generation or generations and thereby deny the landlord the ability on the death of the Tenant to amalgamate the holding into the Landlord’s other in-hand farms for the better management of Ladykirk estate of which the holding forms part.
8. In all the circumstances it is reasonable that the Landlord should withhold his consent.
[6] The tenant did not execute nor intimate any assignation of the lease on or before 1 October 2005. We were informed that in November 2005, his agents had intimated that they intended to await the decision of the Court in the case of Luss Estates v Sturgeon. That was the first case under section 10A to come before the Court and it was reasonably expected to give guidance as to how the section should be operated. Our formal Order in that case was dated 19 January 2006.
[7] By assignation of 14 August 2006 Robert Fleming purported to assign the tenant’s interest in the lease to James Ferguson “with entry as at 1 October 2005”. There was no suggestion before us that the fact of assignation was intimated to the landlord at that time. On 27 March 2008 the landlord served a rent review notice on Robert Fleming. James Fleming raised the present application in April 2008.
[8] Robert Fleming is in his late eighties. He is unmarried and has no children.
[9] In their pleadings the landlords assert that the value of the farm if it could be sold with vacant possession would be in excess of £2.09 million, and the value with a new sitting tenant would be £1.04 million.
Submissions for the landlord
[10] It was submitted that the application was incompetent as the Court had no jurisdiction. It became apparent, however, that this submission turned essentially on the submission on the merits. If James Ferguson was not now to be regarded as the tenant, the application would fall to be refused. If he was, no question of jurisdiction arose. It is unnecessary for us to say more on this head.
[11] The substantive submission was that, where landlords had actually given intimation withholding consent, there was no consent for the purposes of section 10A(1). There was no justification for any deemed consent in the circumstances. The decision of the Chairman sitting as a Divisional Court in the Luss Estates case should not be followed. As a general point, Sir Crispin stressed that section 10A should be seen as taking away the right of a landlord to prevent assignation and, in case of ambiguity, it should be construed strictly and narrowly in favour of the landlord: Stair Volume 12, para. 1131; Cross p177.
[12] He submitted that as section 10A(2) requires notice of an intention to assign followed by a right to withhold consent, a tenant could not simply go ahead and actually assign the tenancy contrary to the landlords’ stated objection until the validity of that objection had been determined, either by agreement or by the Court. He stressed that the alternative view would lead to all sorts of practical difficulties. It was essential to have the identity of the tenant clearly determined for the purpose of formal notices and for proper compliance with the machinery of Government regulation.
[13] He referred to the English case of Bromley Park Garden Estates Ltd v Moss. That case included reference to a tenant’s right to ignore a refusal given unreasonably and simply go ahead with the assignation. He stressed that this decision was based on analysis of the assumed contractual intention of parties. In the present case the Court was dealing with a pure question of statutory construction. The English authorities were of little assistance.
[14] He further submitted that, even if the decision in the Lusscase was well founded and an assignation could have taken effect immediately, it could not be effective until the assignee took possession of the farm. He submitted that it was clear from the applicant’s averments that he had never taken possession.
[15] Sir Crispin then turned to consider the terms of the notice. He submitted that it did not provide sufficient detail and accordingly that the landlord had reasonable grounds for refusing consent. It was not for a landlord to make his own enquiries. Subsection (2) provided that the notice “must include the particulars of the proposed assignee”. Because of this explicit provision, the case could be distinguished from Barns-Graham v Lamont. It was the notice which had to contain the particulars, not the covering letter. But even if the covering letter was to be considered, it was wholly inadequate. Guidance as to the meaning of “particulars” could be obtained from the decision in Simpson v Hendersonpp371, 376 and 379. He submitted that “particulars” should include detail of how the assignee proposed to fulfil particular obligations under the lease. It was not legitimate to have regard to the knowledge of the parties. The notice itself had to be unambiguous: Cayzer v Hamilton (No. 1). If it was possible to have regard to the knowledge of the landlord he conceded that a proof would be required.
[16] Counsel went on to make submissions in relation to what was meant by “reasonable grounds”. He accepted that the important grounds were those set out in heads 6 and 7 of the letter. Reasonableness should be viewed from the standpoint of the landlord: Stair Volume 13, para. 360. The onus was on the tenant to show that no reasonable landlord would have refused on such a ground: Scotmore Developments Ltd v Anderton p372H. The landlord was entitled to consider only his own interest unless there was some disproportion between the benefit to him and the detriment to the tenant: International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd.
[17] In relation to general reasonableness, he submitted that the Court was dealing with a statutory permission and there was, accordingly, no need to construe matters by reference to what parties might have meant at the outset of the lease. This was an important distinction in relation to the English case law. It was significant that Parliament had not used the formula often found in commercial and other leases to the effect that the tenant could only assign with the consent of the landlord “which consent was not to be unreasonably withheld”. The phrase “reasonable grounds” was used without any qualification. There was nothing to require any restrictive test such as that the grounds had to relate to the personal circumstances of the assignee. Any grounds were relevant provided that they were reasonable. The fact that the phrase was followed by examples in the Act did not qualify the generality. There was no scope for the ejusdem generis rule: Gray v Crofters Commission p70; Ambatielos v Anton Jurgens at p183 and p190; Canadian National Railways v Canadian SS Lines Ltd at p211.
[18] It was an important part of his submission that Parliament had not changed the rights given to the landlords under section 25. In the present case, the landlords had a reasonable expectation of being able to recover possession of the farm on the death of Robert Fleming who was aged 87, unmarried and childless. The effect of any assignation would be to deprive the landlords of that right. There was no reason why that should not be accepted as a relevant ground. The reasonableness of it would be a matter for proof.
[19] Counsel went on to examine various dicta on the meaning of expressions such as “consent not to be unreasonably withheld”. Most cases were English and to be approached with care because of the differences of principle involved: Stair, volume 13, para. 360. He referred to International Drilling Fluids Ltd and to Bromley Park Garden Estates Ltd. The Scottish cases cited were Renfrew District Council v AB Leisure (Renfrew) Ltd and Scottish Tourist Board v Deanpark Ltd.
[20] He repeated the submission that there was no reason to restrict the wide ambit of the phrase “reasonable grounds” in the context of section 10A but, in any event, pointed out that the landlords were not seeking a collateral advantage. The landlords had every right to use section 25, if they could, and in the present circumstances had a reasonable expectation of being able to use it to terminate the lease.
[21] He said that, on a proper view of section 10A, it did not raise any issue under the European Convention on Human Rights (“ECHR”) because it was accepted by the landlords that a wide construction of “reasonable grounds” would provide adequate protection for the landlord in that context. If the Court had any doubt about the scope of the relevant grounds it should give effect to the provision in a way that was compatible with ECHR, namely by a wide construction: Poplar Housing and Regeneration Community Association Ltd v Donoghue. He referred to Article 1 of the First Protocol. This covered property in the sense of control of rights: James v UK. The rights given to the landlords in terms of section 25 were valuable rights. The precise value was a question of the particular circumstances. It was a particularly valuable right in the present case. The landlords had a legitimate expectation of being able to recover possession in the foreseeable future if there was no assignation.
[22] The relevant case law from the European Court of Human Rights provided a general indication of what was acceptable within the convention. A construction which fulfilled the criteria of the ECHR was the construction to be applied. He referred to James v UK p140 at paras. 39 to 46 and p144 at para. 50. He submitted that it was relevant to have regard to the Parliamentary history. Put shortly, section 10A had been introduced by a private member without the support of the Executive. Interference with contractual rights in a lease was a control of property within the scope of Article 1: Mellacher v Austriap408, para. 44; p410 at paras. 48 and 53. Wilson v First County Trust Ltd No. 2 at p836, paras. 39 and 44 and p844 at paras. 68 to 70 provided guidance as to the proper approach to balance and proportionality.
[23] It was suggested that guidance as to the proper approach could also be obtained from the cases challenging the legislative competence of an Act of the Scottish Parliament: A v The Scottish Ministers at p19, paras. 48 to 53; and Adams v The Scottish Ministers p207, para. 81 and p217 para. 105. Section 10 could be construed in a way which was compliant. However, if the Court took the view that only a restricted category of grounds could be regarded as relevant for the purpose, he sought leave to have an opportunity to consider whether to challenge the legislation. This would be a devolution issue and would require further intimation.
Submission for the applicant
[24] For the applicant, junior counsel opened by looking at the structure of section 10A. He stressed that the right was given to assign to a limited class of persons. In relation to the Parliamentary history, it was to be noted that the original proposal had been greatly restricted after consideration by the Executive. The original proposal which the Executive had not accepted was to allow assignation unrestricted. As enacted, the right was limited to a defined class.
[25] He submitted that the circumstances could not properly be distinguished from those in the decision in Barns-Graham. The Court must have regard to both the formal Notice and the covering letter. The matter should be addressed in a practical sense. Sufficient basic detail was provided along with an offer to provide more detail if required. The detail provided was certainly sufficient on the assumption that the assignee was known to the landlords. The suggestion that the particulars required by the Act should include detail of how the assignee proposed to implement the lease was quite unfounded. The assignee was to undertake all the obligations. There was no justification for any requirement to give particulars as to how he would deal with individual items. If the landlords had a good reason for concern they could have asked for more detail. It was accepted that it might be a reasonable ground for refusal that more time was required for proper enquiries on an identified matter if the landlords request was reasonable. The tenant would have the easy remedy of delaying the assignation and serving another Notice once the landlords’ reasonable enquiries had been dealt with.
[26] In looking at “reasonable grounds”, the applicant accepted that there was no question of a reverse ejusdem generis rule. But that did not mean that the grounds were entirely unrestricted. He submitted that the proper approach was fully set out in the case of Burgerking v Rachel Charitable Trust. The principles to be applied in a commercial lease were the same in England and Scotland. The same principles ought to be applied in relation to section 10A which was just the equivalent of a statutory change to a lease.
[27] He submitted that it was for the landlords to show that their dissatisfaction in terms of subsection (3) was reasonable. However, his main contention was that onus did not matter. The question was whether the grounds in the landlords’ intimation were in fact reasonable. He analysed the grounds set out in the letter. The main legal submission was that Parliament had specified the class of persons to whom assignation might be made. The effect of the landlords’ submissions in relation to section 25 would be to limit the class still further to near relatives. That, plainly, was not the intention of Parliament. The landlords’ contentions would cut across the very right given by Parliament. In any event, the aim of the landlords under grounds 6 and 7 was plainly a collateral one. The intention was to bring the lease to an end. It was submitted that “reasonable grounds” had to relate to the continuing lease: Burgerking p228 I; BromleyPark p1032 D-E; and International Drilling.
[28] Mr Di Emidio stressed that it was essential to look only at the grounds intimated by the landlord. Material in the pleadings going beyond this had to be ignored: Burgerking p228 L.
[29] In relation to the submissions based on Article 1, counsel submitted that the “rights” relied on by the landlords were not properly to be regarded as “possessions”. They were too indeterminate. In any event, the provisions of section 10A were a permissible control whichever way they were construed. They were plainly within the competence of Parliament even on the Burgerking approach. The landlords’ expectations were not strong enough to be regarded as “legitimate expectations” when regard was paid to the comparative use of that expression in the European jurisprudence. He referred to Spadea & Scalabrino v Italy; Kopecki v Slovakia paras 35, 45 and 49; and to Austin v London Borough of Southwark.
[30] He dealt with dicta in Lousada & Co v Lesser(Properties). He submitted that the comments of Lord Ross at p188 were quite consistent with reliance on the principles in Burgerking. Lord Ross had not commented adversely on the attack on collateral benefits as being irrelevant as grounds of objection. There was no question of trying to prepare an exhaustive list. That was not the same as saying that certain grounds could not be accepted.
[31] In his submission, the whole scheme of section 10A was a proportionate form of control well within the wide margin of appreciation available to Parliament. The right to assign was to a limited class. There was machinery to control it. That machinery could be construed in accordance with established principles applicable to leases without any question of breach of ECHR. He made reference to Vontas and others v Greece.
Response
For landlords
[32] In response, Sir Crispin emphasised various aspects of his opening submission. He stressed the importance of the statutory provisions relating to succession. On the tenant’s death the Executors could transfer the tenancy to the same class as was now possible under the provisions of section 10A. The only difference was that if the transfer was on death the landlord would have full rights under section 25. He submitted that the essential intention of section 10A was simply to bring forward the day when a transfer would be possible.
[33] There was no reason to think Parliament intended to create better rights in the transferee. The rights of the potential successors had, on any view, been improved. The landlords could only succeed if their ground of objection was reasonable. That would require consideration of the whole intention of the landlord. For example, if they simply intended to terminate possession to relet to another tenant this might not be a reasonable ground.
[34] The reference to “reasonable grounds” should be read as unlimited: Lousada.p188. But, even if the objection to “collateral” grounds was well founded, it was important to note that the rights under section 25 could properly be treated as part of the lease. They were, in effect, a statutory break clause. A landlord was entitled to rely on such provisions. They were in no sense collateral.
[35] Under ECHR, the statutory break provided by section 25 should be regarded as a property right. It was not necessary to invoke any concept of “legitimate expectation” although he could get support for that argument from Kopecki, paras. 35, 45-49. What he had was a statutory right. It was not just a hope. The value of the right would be a matter of circumstances. He referred to the decision in Immobiliare Saffi v Italy. If there was control of rights, there had to be some safeguard. That could only be provided by an unrestricted approach to what were to be regarded as “reasonable grounds”.
[36] More generally, Sir Crispin pressed his submission that a landlord must be entitled to raise particular points of concern if he was not satisfied about them. For example, there might be a specific provision in a lease to deal with a recognised problem of the tenancy. A landlord would be entitled to be satisfied about how the proposed assignee would deal with it. He accepted that only reasons given by the landlords at the time were relevant but, where the reason given was that the landlords said that they did not have adequate information and were able to point to subsequent information as justifying the initial concern, that would be a relevant factor.
For the applicant
[37] Mr Reid brought together the various submissions. He invited us to make various findings and then set out his submissions under eight chapters. The main matters can be summarised as follows. He presented an analysis of section 10A and of our decision in the case of Luss Estates Ltd v Sturgeon. He submitted that the decision was sound and that there was no justification for any change. The structure of section 10A showed that it was social legislation with the aim of encouraging continuance of a landlord and tenant relationship and modifying, in the public interest, what was seen as an unjustified restraint on tenants’ rights to dispose of their interest in a tenancy to a suitable class of assignees. In context of the overall provision of security of tenancy, this could be seen as a modest tinkering. It was well within the margin of appreciation of the national legislation. The context was of a contractual lease supplemented by a body of legislation. The introduction of section 10A was not new. It was similar to common law provisions dealt with in the range of cases before the Court. The only effect of the change of terminology was, in his submission, to demonstrate that the onus rested on the landlord.
[38] He dealt with various specific terms. In relation to the question of a landlord not being satisfied, the landlords’ doubt had to be reasonably based. The legislation presumed a reasonable and sensible landlord and tenant acting together in a reasonable manner co-operating to implement their contract: MacKay v Dick & Stevenson.
[39] He noted that there was no definition of the word “particulars”. The expression was familiar in a police context. Taking down a person’s “particulars” meant no more than a note of name and address and possibly occupation. The term was plainly sensitive to its context. Particulars of a person were plainly quite different from particulars of a claim. The decision in Simpson v Henderson was not helpful. It could not be thought that the tenant had to provide every detail in the notice. The notice in the present case had to be read along with the covering letter. The tenant had tried to make available to the landlord the information he required. A landlord was not acting reasonably if he did not take advantage of available sources of information. In relation to the practical implications of assuming a deemed consent if grounds were not reasonable, he suggested that at common law, if a landlord refused consent unreasonably, the tenant had a range of options. He could, of course, raise an action for declarator that the grounds were unreasonable but, if confident, he could simply carry on with the assignation: Bromley Park Garden Estates Ltd, p1033 F. The practical problems were over-stated. There would be some practical difficulty whichever course was followed. But where the tenant simply assumed that the assignation was valid, the landlord could protect his position by serving any necessary notices on both parties. There were other examples of periods of uncertainty due to Court proceedings. This was far from conclusive. If the assignation was not held to be effective pending provisions for declarator, when would it be effective? Subsection (2) provided for a specified date. There would be uncertainty on either approach.
[40] In relation to the argument about possession, he pointed out that in the present case there was no question of a singular successor. The landlords had not changed so there was no need for possession to perfect a right. The applicant could rely on the personal contract: Paton and Cameron p. 159.
[41] He stressed that the statutory provision could not be assumed to have been passed in a vacuum. The common law approach to unreasonably withholding consent was well established. Burgerking provided an elegant summary of the law in Scotland and showed that it was similar to the law in England. The effect of the expression used in section 10A was simply to put the onus on the landlord. It did not change the substantive principles. The principles set out in Burgerking did not rest on any assumed contemplation of parties at the outset of the lease. Parliament could be assumed to be aware of the established law.
[42] In relation to the Human Rights argument, counsel suggested that it was still unclear precisely what right was said to be infringed. Ground 6 of the letter had referred to a “reasonable expectation” based on section 25 but, in his submission, that was clearly a collateral matter. It was an expectation of being able to destroy the landlord and tenant relationship to suit the landlord’s other purposes. The question was whether the landlord had any relevant “possession” within the meaning of Article 1 of the First Protocol. Plainly the landlords had no accrued right as at 1 September 2005. All they had, in terms of section 25, was a “hope”. This was not a “legitimate expectation” as explained by European jurisprudence: Austin para. 46; Kopecki paras. 46 and following.
[43] For the reasons set out by junior counsel he contended that the grounds in the landlords’ intimation could all be shown to be unreasonable. Accordingly the tenant was correct to proceed on the basis of deemed consent.
Personal bar etc.
[44] We had heard submissions suggesting that questions relating to the period after the landlords’ intimation of refusal of consent should be left to a proof before answer. We had intended to press parties for detail of the issues upon which they thought further evidence might be required. However, at the start of proceedings on the second day, Sir Crispin was able to inform us that agreement had been reached that the pleas of waiver and personal bar should simply be left over for further consideration in the light of our findings on the current debate. Mr Reid said that there was a recognition by parties that the real issue between them was the reasonableness of the landlords’ grounds for refusal. Other matters might need debate or might be resolved in another way depending on the outcome of the present debate. We think it sensible to leave over these matters including the question of taking possession and the date when that might have been effective and need say no more at this stage.
Discussion
[45] The parties’ submissions covered a variety of matters but we think that two main issues are critical. The first relates to the procedural aspects and turns largely on question of whether a tenant can treat a refusal without reasonable grounds as equivalent to consent. The second relates to the validity of the refusal based on section 25. However, it is necessary first to consider the ECHR argument.
ECHR
[46] Sir Crispin appeared to suggest that we could deal with the main issue of construction in two stages. If we were against the landlords’ submission that a wide approach could be taken to “reasonable grounds”, we should allow the landlords time to consider whether to challenge the competency of Parliament to enact section 10A. However, we are satisfied that the Court cannot approach an issue of construction without a preliminary decision as to the effects of the ECHR. We have considered whether to allow a further hearing to deal with this point, but we have reached a clear view on the full submissions we heard and consider it appropriate simply to deal with the matters now before us.
[47] Sir Crispin’s submission was that it was reasonable for the landlords to object in order to preserve the rights they would have had under section 25. If we had accepted that argument no question of legislative competence would arise. But, if such a ground of refusal was not open, he contended that it followed that section 10A had interfered with rights the landlords had under section 25. These were rights they would expect to be of value, in the circumstances of this case, in allowing them successfully to object to any likely beneficiary. This would allow them to recover possession of the farm. He asked us to allow an opportunity to consider whether to raise the matter formally as a devolution issue on the basis that, in enacting section 10A, the Scottish Parliament had been in breach of the provisions of Article 1.
[48] While this proposal seemed to invite us to defer consideration of the issue, it is plain that the impact of Article 1 has a potential bearing on construction. Had we been satisfied that the removal of the protection given to the landlords by section 25 was a breach of Article 1, this would have been a relevant factor in our construction of section 10A. In terms of section 3 of the Human Rights Act, we would have had to attempt to construe section 10A in a way that did not interfere with the landlords’ rights under section 25.
[49] Although no explicit submission was made to this effect, there was at least a hint of a suggestion that ECHR should be kept in mind when approaching construction and the construction which most clearly complied should be preferred. However, section 3 only has effect where the alternative construction would lead to a breach: Poplar Housing and Regeneration Community Association Ltd v Donoghue p72H. There is no question of favouring one construction over another simply because, in some way, it is thought to be “more compliant” with ECHR. Unless the preferred construction leads to a breach of Article 1, there is no justification for considering an alternative approach. On the other hand, if it does lead to a breach of that Article, we are positively obliged to look for an alternative.
[50] It is sufficient to say that we have not been persuaded that the nature of any interference with the landlords’ possessions is such as to demonstrate a breach. That is a conclusion we have had to reach for the purpose of determining the issues before us. There is, accordingly, no basis for the involvement of Scottish Ministers at this stage. We have had to reach a decision on the matter to deal with the issues before us. Any attempt to raise a devolution issue would require to take place at the stage of any appeal. We express no view as to the competency of otherwise of such a course.
[51] We have reached our conclusion on the following basis. The first question is whether the new provision could be viewed as a control of the use of property within the meaning of Article 1. We understood Sir Crispin to contend that the lease was a property right and that the Article came into play because the effect of the new provisions was to deprive the landlords of the rights they would have had on the death of the tenants. Although there was some discussion of this in terms of the loss of a legitimate expectation of being able to recover possession, we did not find the authorities cited on that matter to have much bearing on the circumstances of the present case. The authorities relied on as illustrating the scope of that concept did not make clear to us the principle underlying its use.
[52] We accept that rights under a lease are normally to be regarded as possessions or property within the meaning of Article 1. We accept that statutory terms applicable to a lease can be seen as part of the lease. Put simply, landlords in an agricultural lease, prior to enactment of section 10A, had a right to recover possession of the land on the tenant’s death. This was, of course, subject to an exception if the tenant was married or had children. The value of that right would depend on the risk of it being defeated by the exception. In the present case that risk was thought to be small.
[53] We accept Sir Crispin’s contention that a distinction is to be drawn between the existence of a right and its value. A right which can be defeated by events may be described as conditional. But in practice, the value of most, if not all, rights is conditional; it is at the mercy of events.
[54] It is sufficient to say that, absent section 10A, the landlords had a good chance of being able to resume possession of their land on the death of the tenant and being able to exercise the normal range of proprietary rights in that land. The existing legislation gave them a clear right to terminate the lease on death of the tenant. The death itself was an event certain. There were no near family members and it was not suggested by the tenant that there was any real likelihood that there would be. Although the possibility could not be excluded, it may be noted that even in the event of the tenant marrying or having children, the landlords’ rights to bring the tenancy to an end would not be lost. We need not detail the statutory provisions but one ground available would be lack of experience or training of the proposed successor. In the circumstances, it is fair to say that the rights which the landlords would have had to resume full possession have been lost because the provisions of section 25 have been effectively superseded.
[55] We are satisfied that the provisions of Article 1 were engaged. Section 10A represented a significant interference with the landlords’ rights. But, we are not satisfied that there was a breach. It is well established that any interference with property rights must strike a fair balance between the demands of the general interest of the community and the protection of the individual’s fundamental rights. There must be a reasonable proportionality between the aim or purpose of the acts or provisions in question and the impact on individuals. But the legislature enjoys a wide margin of appreciation. Their assessment is to be respected unless it is clearly without a reasonable basis.
[56] The new provisions had a legitimate purpose. They must be viewed in the context of the whole scheme of control of agricultural land and protection of tenant’s interests. There is a plain benefit to society in allowing an elderly farmer to pass on his interest in the lease to a suitable younger person. A landlord’s interests in the proper use of the land are maintained by his rights to object on reasonable grounds. Although, of course, each piece of legislation must be assessed in its own context we refer to the example of Wilson v FirstCounty Trust. Legislation can be accepted as proportionate in its overall effect even if disproportionate in the context of a particular case: Lord Rodger of Earlsferry p886. We cannot reach any conclusion based solely on the alleged impact on the landlords in the present case, even if, for present purposes, we must accept, as well founded, the asserted differences in value.
[57] We heard no submissions as to onus. But the legislature enjoys a wide margin of appreciation and the Court must respect Parliament’s assessment unless it is without a reasonable foundation. The onus must, accordingly, be on the party asserting a breach. We considered this matter in Davie v Countess of Sutherland’s Trustees at p148 and it is unnecessary to repeat this material. We expressed the view that it was not for an individual citizen to require to defend the competence of legislation. For present purposes it is enough to say that we are not satisfied that, on any construction, section 10A gives rise to a breach of Article 1. We accordingly have felt free to construe it without regard to the provisions of the said section 3.
The procedural issues
[58] The Act provides no direct guidance as to the procedural implications of the new provisions. However, in Luss Estates Ltd v Sturgeon the Court discussed the question of whether the tenant could treat a refusal without reasonable grounds as equivalent to consent and concluded that this was a proper approach. We have reconsidered that decision but have found no good reason to depart from it. Indeed, we have found support for it in the English common law position touched on by Slade L.J. in the Bromley Park case. He said: “It is well settled that a tenant holding under a lease which contains a clause [to the effect that the landlords consent to an assignment was not to be unreasonably withheld] is released from such a fetter and has the right to proceed with an assignment of his lease, if the landlord has unreasonably refused his consent. It is, of course, open to the landlord thereafter to challenge the validity of an assignment effected in such circumstances on the grounds that his refusal of consent was not in fact unreasonable”: p1033 F-G. We heard no further discussion of the principle in question nor of the basis for it. Accordingly, it must be said that we are not entirely sure that the principle would necessarily apply to the provisions of section 10A. It may be that a provision that consent should not unreasonably be withheld can be taken to impose a duty on the landlord. He would not be able to rely on his own breach of duty to challenge an assignation made without consent. However, it is clear that the situation in which such questions arises is likely to be one giving rise to potential practical difficulties. Whatever the theoretical basis for the English approach, we take some reassurance from the consideration that it can be assumed to have proved workable in practice.
[59] Many of the potential difficulties, including those experienced in the present case, might be avoided if parties had a clear understanding of what they were doing, or trying to do. In the Lusscase, reference was made to the ability of the tenant to take account of difficulties when deciding the terms on which he wanted to proceed. In particular, the tenant could take account of potential difficulties when determining the timetable. We can see circumstances in which timing might be significant: questions of tax planning could be an example. But, in the usual case, a tenant ought to have no difficulty in intimating his intention in good time to allow the landlord to make reasonable enquiries. Because of the statutory limitation to 30 days for a formal reply, it might well be reasonable for a landlord to have to withhold consent if reasonable enquiries made without delay had not been answered. It may be noted that the Act refers to the withholding of consent rather than outright refusal although for practical purposes there may be little difference. We think it would normally be a reasonable ground for withholding consent that a landlord had not had an answer to a relevant enquiry reasonably made. But, the tenant could avoid this problem by making preliminary contact with the landlord to explain his intentions before the formal intimation and, if faced with a such withholding based on a request for further information, he would normally be able to proceed by providing the required information either with or followed by a fresh intimation.
[60] In any case, a tenant who is faced with refusal of consent has to decide what to do. He might be able to provide the landlord with further information and make a fresh intimation. He might raise an action for declarator that the grounds of refusal were unreasonable. However, as discussed in Luss Estates he is also entitled to treat an unreasonable refusal as a deemed consent and, accordingly, if confident on that matter, he has a third option of simply going ahead with the assignation.
[61] The parties in the present case appeared to proceed on the basis of a tacit agreement that the statutory intimation of an intention to assign could be taken as equivalent to intimation of an actual assignation. We are not, for present purposes at least, required to express any view of that proposition as a matter of law but the practical difference is well illustrated in the present case and it would clearly make sense for a tenant to intimate to the landlord that the assignation which had been proposed had in fact been executed. This would allow the landlord to challenge it at an early stage and arrangements might be made, by agreement or otherwise, to limit or avoid any anticipated practical difficulties.
Other procedural points
[62] We are satisfied that the covering letter can be read along with the document which the tenant appears to have contemplated as the formal notice. The Act does not specify any particular form of notice other than that it should be in writing: subsection (2). Notice could be given in a letter without any use of the word “notice” although it is important that the tenant does make absolutely clear the fact that he is giving a notice for the purposes of section 10A. We think that where the two separate pieces of written intimation relied on were both sent in one envelope, the fact that one purported to be a “Notice” does not detract from the content of the other. In any event, we accept that the decision in Barns-Graham v Lamont is sufficient authority for that approach in the present context.
[63] However, we also accept that, in the context of section 10A, the intention of the use of the word “particulars” was simply to require sufficient detail to identify the person involved and show why that person was said to fall within the class of persons specified in subsection (1). We agree that in the context of a claim for compensation the word “particulars” would necessarily have a quite different meaning. We do not think it helpful to consider the detail of what might be required in that context. We must look at the present statutory context.
[64] Although there is a superficial attraction in the argument that it is necessary to give sufficient information to provide a prima facie basis upon which a landlord might be satisfied of the matters specified in subsection (3), we do not think that Parliament can have had a positive intention that this should be done. The two matters specified are given only as examples of possible reasonable grounds. Plainly the notice could not have been expected to go as far as to exclude all other possible grounds of refusal. Even in relation to the specified grounds, Parliament could hardly have intended a simple reference to “particulars” to be treated as equivalent to a requirement to make a full disclosure of all financial assets and liabilities. If it is not a requirement of a complete disclosure, we think it must follow that it is not a basis for a requirement of any disclosure. We cannot create some “half-way house”. In any event, we cannot see that it would serve any positive purpose. It would be unfortunate if parties had to be caught up in disputes about the formal sufficiency of a notice when other enquiries were, in any event, inevitable. In practice it is likely that the landlord would know something of the prospective assignee and have a good idea of what further information he required, or, if he did not, that the process of vouching the financial and other standing of the assignee would take some time and require a fairly full disclosure of financial information.
[65] The circumstances which might have to be relied on for the purposes of the matters set out in sub-paragraph (3) are likely to be quite varied. A tenant anxious to ensure that the assignation would go through without difficulty might be expected to provide as much information as he considered necessary to satisfy the landlord not because of a statutory requirement to provide “particulars” but simply as a matter of commonsense. He might think it sensible to enter discussions or provide material in advance of the formal notice. This approach would, we think, provide a workable mechanism. In the present case, the tenant appears to have assumed that the landlord knew the prospective assignee. If he was correct, the mere name might have been sufficient in practical terms: if wrong, a great deal of information might well have been required. The meaning of the word “particulars” could not be intended to vary according to the accuracy or otherwise of the tenant’s understanding of the landlord’s state of knowledge.
[66] We heard conflicting submissions as to the onus of proof of the reasonableness, or otherwise, of the grounds. The normal rule is that the onus rests on the party who has raised an application. But in the particular circumstances of section 10A that does not provide a reliable guide. Where a tenant purports to rely on a deemed consent, it might well be the landlord who had to come into court for declarator that the purported assignation was invalid. In the present case, the tenant has been first to see the need for judicial clarification. Where the primary rule cannot be applied, determination of where a statutory onus lies is not free from difficulty. It may turn on the impression given by the language used. There is, of course, an established line of English authority relating to the unreasonable withholding of consent. The onus is on the tenant to show that the withholding is unreasonable: International Drilling p.520C. That was accepted in Burgerking p228 J-K. If a party asserts that something is unreasonable the burden is normally on such party to establish it. However, we do not consider this material determinative of the issue before us. English authority is based on different underlying concepts: Stair para360, Article “Assignation p372. Subsection (3) provides that the landlord is only entitled to withhold consent if there are reasonable grounds for him to do so. He is obliged to specify the grounds (4). We think these provisions support the view the onus rests on the landlords to establish their grounds.
[67] In practice, this is not the type of situation where the onus itself would be expected to be of great significance. The grounds are to be specified by the landlord and consideration of whether or not they are reasonable will be a matter for the Court. We accept that in considering reasonableness we should have regard to reasonableness from the point of view of the landlord. Reasonableness is a concept which depends entirely on its context. The context is a landlord’s grounds for withholding consent. The two explicit examples given relate to the landlord being “satisfied”. This cannot be taken as a subjective test but it is clearly one which requires consideration from the viewpoint of a landlord. We accept as relevant the English authority to the effect that the reasonableness is to be viewed from the landlord’s perspective: eg. International Drilling p.521C-D We see no reason to doubt that this should apply under section 10A.
The grounds
Section 25 issue
[68] Of the various grounds specified in the letter, the one of greatest substance appears to be that covered by heads 6 and 7. It was accepted that these two grounds fell to be read together. They turned on the right of the landlord to recover possession on death; referred to for convenience as the rights under section 25.
[69] We accept that the essential difficulty for the landlord is that the provisions of section 10A were plainly intended to effect a change to the statutory regime. Parliament could not have intended a landlord’s right to refuse to be wide enough to negate the intended effects of the change. If the grounds of refusal, however expressed, can be seen to have that effect they could not be regarded as reasonable. Accordingly, the question comes to be whether the change in issue is to be seen as one intended by Parliament. The new provisions plainly had in mind the tenant’s right to pass on his interest in the tenancy to a suitable successor on his death. The definition in subsection (1) makes that clear. That transfer on death was subject to the rights of the landlord was an important factor prior to section 10A and Parliament must be taken to have been well aware of its implications. It is clear that the effect of a right to assign is that the transfer of tenancy could take place at an earlier stage than death. It is also clear that in relation to any particular tenant its effects wholly supersede the provisions relating to transfer on death.
[70] Statutory provisions frequently have a range of consequences. It could not be said that all actings intended to avoid the consequences of a particular piece of legislation would necessarily be unreasonable. Parliament might well have wished to allow certain types of consequences to be avoided. In particular, there might be circumstances where Parliament recognised the possibility of unforeseen adverse consequences and must have intended to provide a safeguard. However, at the other end of the spectrum it might be obvious that a particular effect was an integral part of the change and in such a case it plainly could not have been Parliaments intention to allow it to be avoided. There may be difficult cases falling between these two categories.
[71] We can accept that the primary intention of Parliament in enacting section 10A was unlikely to have been to limit the effects of section 25. As Sir Crispin stressed, no attempt was made to effect any direct change to the provisions of that section. It may be assumed that the main social purpose was to allow an elderly, ill or unenthusiastic tenant to give up the farm in favour of a suitable relative rather than be forced to hold on until death. But, we are satisfied that Parliament must have had in mind the fact that the operation of the new provision would have the effect of removing the landlord’s rights under section 25. That was such an obvious consequence that it must be assumed that Parliament intended the legislation to have that effect. In other words, we are satisfied that the loss of a landlord’s right to object to a transfer on death was such a clear and obvious consequence of the right to assign that it must be taken as an integral part of the change intended to be effected by section 10A. It cannot be reasonable for a landlord to pray in aid such consequences as a ground for refusal of consent.
[72] It may be added that we reach that conclusion without regard to the information provided bearing on the actual intention of Parliament. We heard no submissions as to whether and, if so, to what extent, we were entitled to make use of material such as SPICe Parliamentary briefing papers. Sir Crispin brought it to our attention and it must be assumed that the landlords accept it as legitimate for us to have regard to it. The SPICe briefing bears to show that when section 10A was first proposed, the Executive opposed it explicitly because it would have the effect of creating a perpetual tenancy. In other words, it was, indeed, recognised that the effect would be to cut out the benefit to a landlord provided by section 25. The initial proposal was revised so that, as enacted, it specifies a particular class of persons to whom the assignation might be made. That revision can be seen as an attempt to go some way to meet the objection that the tenancy would be perpetual. It had to be kept within the family. But, plainly, the new provision did not go as far as incorporating the right available to the landlord to terminate the lease in such circumstances. As we have discussed that must be taken to have been clearly understood by Parliament.
[73] We are satisfied that Parliament must be taken to have intended that the new provision would supersede the provisions of section 25. It would not be reasonable to allow a landlord to object on the ground that he should, nevertheless, be entitled to keep the benefit of that section. It follows that the landlords’ refusal, in so far as based on that contention, is not a reasonable ground for refusal.
[74] Sir Crispin appeared to go some way to recognise the force of this. He accepted that it would be necessary to consider the whole intentions of the landlord. It would not be good enough that the landlord simply wished to obtain vacant possession so as to be free, for example, to relet to another tenant. He would have to demonstrate his intention to use the estate in a reasonable way compared with the way it would be used on assignation. This concession goes far to highlight the essential weakness in the landlords’ position. There is no doubt that the substantive aim is to be able to bring the tenancy to an end. We accept the submission of the applicant that the practical effect of upholding this ground as reasonable would be to restrict the class of persons to whom a tenant was entitled to assign. It would be limited to near relatives. The intention of Parliament was plainly otherwise.
[75] As we consider that refusal on the basis of the section 25 argument is unreasonable because it contradicts the intention of Parliament, we can deal briefly with the submissions based on the principles set out in Burgerking. The decision shows that the Courts in England and Scotland have taken the view that, in relation to any provision on the lines that consent to assignation of a lease by a landlord will not be unreasonably withheld, certain types of grounds will not be capable of being regarded as reasonable. The underlying principle was expressed by Balcombe LJ in the International Drilling case: “The purpose of a covenant against assignment without consent of the landlord, such consent not to be unreasonably withheld, is to protect the lessor from having his premises used or occupied in an undesirable way, or by an undesirable tenant or assignee.” It was said to be as a corollary of that principle that the principle of construction emerged that the landlord was not entitled to refuse his consent on grounds which had nothing whatever to do with the relationship of landlord and tenant in regard to the subject matter of the lease: op. cit. p250 B-C.
[76] We are not persuaded that the provisions of section 10A are properly to be read as restricted by reference to such a purpose or that grounds which are inconsistent with continuation of the relationship of landlord and tenant are necessarily collateral to the lease. We accept that the landlord is entitled to have regard to the whole terms and conditions of the lease including those provided by statute. We think he is entitled to have regard to his prospects of resuming vacant possession in terms of the existing lease. Accordingly, a desire by a landlord to preserve his rights to bring the lease to an end cannot necessarily be regarded as collateral to the lease. An example, of this may be found in Bickel v Duke of Westminster, referred to in International Drilling p520C-D. However, the present case is inevitably governed by its statutory context and it serves no purpose to speculate as to what type of grounds might have been reasonable under section 10A in a different context.
The other grounds
[77] The other grounds can be dealt with shortly.
(1) and (2). We are satisfied that it is for landlords to make reasonable enquiry if they are not satisfied by the information provided. As discussed above, we consider that it is not reasonable to rely on the absence of information without making reasonable enquiry and, in particular, without taking advantage of reasonably available sources of information. In any event, it is wrong to say that the landlord had no information. Some detail had been provided and further detail was offered. Accordingly, we cannot accept these heads as disclosing reasonable grounds.
(3) The Notice disclosed that the proposed assignee was a nephew. As Sir Crispin conceded that he could not insist in the reason advanced in the last sentence of this ground, there is no substance in the third ground.
(4) We are satisfied that it is unnecessary for the tenant to spell out how the proposed assignee would fulfil all the obligations of his tenancy. The assignee must be assumed to undertake all relevant obligations. If the tenant has reason to believe that there are particular provisions of the lease which might reasonably cause the landlord concern, it would be reasonable for him to provide information about them explaining how the assignee will deal with them in order to attempt to head off difficulty and delay. But, we are entirely satisfied that it cannot have been the intention of Parliament that the tenant should be obliged to do so. There is no requirement that the tenant should attempt to anticipate a landlord’s areas of concern. We are satisfied that it is for the landlord to make reasonable enquiry in relation to matters which cause him concern.
(5) Sir Crispin accepted that this ground could not stand on its own although he suggested that it might be taken into account, in some way, as a relevant factor adding weight to some other ground. We are satisfied, for the reasons discussed in relation to ground 6, that no weight can be given to this material. The proposed ground is, in effect, a challenge to the whole basis of the new statutory provision.
(8) It was not suggested that this could or would be relied on by the landlord as a separate ground and no more need be said about it.
Decision
[78] In light of the above findings and considerations we determine that the landlord intimated no reasonable grounds for withholding consent to the proposed assignation. and that the tenant was entitled to assign the lease to the applicant. We repel the first six, the ninth and the eleventh pleas in law for the landlords. We invite submissions as to further procedure.
For Applicant: Mr J G Reid, QC and Mr P Di Emidio, Advocate; Messrs Melrose & Porteous, Solicitors, Duns
For Respondent: Sir Crispin Agnew of Lochnaw, QC; Messrs Anderson Strathern, Solicitors, Edinburgh
Note This decision has been appealed by the Respondent to the Court of Session.
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