ANDREW HUGH SPROAT v. SOUTH WEST SERVICES (GALLOWAY) LIMITED
| OUTER HOUSE, COURT OF SESSION |
| | OPINION OF T G COUTTS, Sitting as a Temporary Judge in the cause ANDREW HUGH SPROAT Pursuer; against SOUTH WEST SERVICES (GALLOWAY) LIMITED Defenders: ________________ |
Pursuer: Crawford; Balfour & Manson
Defenders: Robertson; Allan McDougall & Co, SSC
9 November 2000
Introductory
[1]The pursuer, who is heritable proprietor of the farm and lands of Baldoon, Wigtown, served notices to quit on 9 April 1998 in respect of the occupation of four parcels of land occupied by the defenders. There were four separate leases and four separate actions were raised. Because of the common history of events it is convenient to deal with the cases together and make one leading judgment despite some of the terms of two of the leases differing in detail from some of the terms of the other two as hereafter noted. The defenders hereafter mentioned as assignees claim to be in right of occupancy under the written leases.
The Leases
[2]Leases Number 1 and 2 were granted by John Nicholson Sproat on 3 May 1951 and were recorded in the public records of the County of Wigtown on 14 June 1951. Apart from the description of the lands and the rental, they are in identical terms. They were both granted to John MacIntyre Wyllie, Whithorn, "carrying on business as an agricultural merchant in the premises hereby leased". The duration was 99 years from Whitsunday 1949 and the material clauses in relation to occupancy and assignees are as follows:
"(Third)The said two pieces of ground are let as the sites of buildings for use in connection with the Tenant's business of Agricultural Merchant as at present carried on by him and shall not be used for any other purposes whatsoever. In particular said two pieces of ground shall not be used as sites for a dwellinghouse or dwellinghouses.
(Fourth)There are excluded heirs, assignees, legal or conventional, sub-tenants, adjudgers, creditors and managers for creditors, but declaring that the Proprietor will not refuse his consent to an Assignation of the Lease to the extent of the whole subjects for the whole remainder of the Lease granted before the expiry of the Lease in favour of any firm or partnership or limited liability Company into which the said business of Agricultural Merchant carried on by the Tenant may be converted but that the Proprietor shall not be bound to give his consent to any Assignation or said Lease to any Purchaser or Purchasers to whom such firm, partnership or limited liability Company may sell said business; declaring further that the Proprietor shall not refuse his consent to an Assignation of said Lease in favour of any person or persons who may take over the said business by inheritance as opposed to purchase provided that the assignee or assignees shall be proved to the reasonable satisfaction of the Proprietor to be suitable tenants."
[3]The present pursuer, who had succeeded his father, granted two further leases. The third was recorded on 15 September 1960 and the fourth on 1 August 1963. These leases were granted to John M Wyllie Limited and comprised various subjects adjacent to those in the first two leases. The material terms with which these actions are concerned are again identical in that the duration was expressed to be for 99 years and the exclusion clause reads:
"(Third) There are excluded from the tenancy assignees legal or conventional and sub-tenants without the written consent of the Proprietor and also adjudgers, creditors and managers for creditors. "
There were restrictive conditions on use as follows:
"(Fifth)The area of ground hereby let is let as a site for buildings or ground for use in connection with the Tenants' business of Agricultural Merchants as at present carried on by them including without prejudice to the foregoing generality, a right to build and develop the said area of ground as a vehicle washbay and vehicle maintenance depot for the Tenants' own vehicles and the said area of ground shall not be used for any other purpose whatsoever and in particular no dwellinghouse or dwellinghouses shall be erected thereon."
The rental differed in each of the latter two leases.
[4]The next event is a recorded assignation dated 10 April 1973 by Robinson-Wyllie Limited (formerly named John M Wyllie Limited) to John MacIntyre Wyllie purporting to assign all four leases for a consideration of £8,000 paid by him. Although there is no record of any previous assignation by John Wyllie as an individual to any company, intimation of the proposed assignation was made on 13 December 1972 to the pursuer. The pursuer agreed to it in the following terms:
"I agree to the assignation to Mr J M Wyllie trading under the name of South West Services or his nominee of the leases of all the ground at Baldoon Store belonging to Robinson-Wyllie Limited on the conditions at present agreed".
[5]A supplementary agreement between the pursuer and John MacIntyre Wyllie was recorded in the Register of the County of Wigtown on 6 February 1975. That agreement acknowledged that those parties were now in right of the landlord's and tenants' parts of the said four leases; it varied the rental payable under each to a sum totalling £200. They agreed that except as so amended the terms of the leases were ratified and confirmed. No mention of South West Services nor of Mr Wyllie trading were noted in that agreement.
Events Subsequent to February 1975
[6]In relation to these events the Court was presented with some correspondence and heard evidence from Mr Andrew Sproat, now 76 years of age, and in indifferent health, who spoke to events so far as he could remember them. He was adamant that he had never consented to any assignations but had a poor recollection of meetings or discussions with the defenders' only witness, Mr Anthony Soriani. He agreed that all the lands were occupied after Mr Wyllie's death by South West Services and subsequently by the defenders up to the present date.
[7]Mr Andrew Sproat, Junior, who now runs the business, recalled that the rent payable for the leases went up in 1980 and further that additional payments were made in terms of the agreements for water. There was produced a handwritten note from the pursuer to "SWS" dated 29.6.90 which stated "rent £600, water £179". It was decided to increase the rent in around 1995 but no agreement was reached in relation to that matter. Rent has not been accepted since the notices to quit were sent.
[8]When Mr Wyllie was still alive Mr Soriani came into the business and worked as a manager. He then worked as a manager for Mrs Wyllie for some period of time. His own evidence was that he was always a manager and that none of the rest of the family was interested in the business. After Mr Wyllie's death on 7 December 1978 Mrs Wyllie, he said, took on the business but left him to run it. South West Services (Galloway) Limited of which he is now managing director, was incorporated on 8 April 1983, he being given 37% of the shares and Mrs Wyllie having 62%. There was no evidence about the remaining 1%. The Court heard no evidence from Mrs Wyllie.
[9]Mr Soriani strenuously denied that there had ever been a partnership called South West Services as opposed to a business carried on by Mrs Wyllie. He was unable satisfactorily to explain the various cheques which were produced. These cover the period between 1981 and 1986. Rent was paid to the pursuer by cheques which allowed for rent, payments for barley and for water. On their face from 1981 to 1984 they were drawn on a partnership account "South West Services". They had been signed by Mr Soriani and also by his former wife, Jane, from whom at some time prior to 1983 he was divorced. She was the daughter of Mr and Mrs Wyllie. They signed as "partner" and, I find, held themselves out thereby to the payee as partner of a firm "South West Services". In relation to building works conducted on the leased land, a warehouse was erected in 1981 and a weighbridge in 1988. The weighbridge was the only material improvement made by the defenders. The cheque for the warehouse which was produced, bore to be drawn on South West Services' account and was signed by Mr Soriani as a partner. On the cheques produced, the defender's name appears on cheques only after 11.7.84. Between 22 July 1983 and 11 July 1984, according to the numbering of the cheques, 259 cheques would appear to have been drawn in the name of the partnership. The account number at the bank however, remained throughout as 70078265. The warehouse was not built for nor paid for by the defenders.
[10]Mrs Wyllie was confirmed as executrix to her husband on 19 June 1979. He left a universal settlement in her favour. She confirmed to the said four leases. In relation to the first two leases she purported by document dated 20 November 1981 to nominate herself as the person entitled to these leases "in part implement of a settlement of the (sic) deceased"; on the same date, in relation to the second two leases, she nominated herself as the person entitled "in part satisfaction of my claim to prior rights as a surviving spouse".
[11]On 11 December 1981 these documents were intimated to the pursuer's solicitors. They acknowledged receipt making no comment as to the validity and competency of the acquisition or assignation. Matters remained thus until Mrs Wyllie, purporting to act as executrix, recorded an assignation on 10 November 1994 of the first two leases (again said to be in part implement of a settlement). Furthermore, as widow, she purported to assign the same two leases to the defenders. That assignation was recorded on 6 December 1994. The pursuer did not and was never asked to consent to any assignation.
Findings on the evidence led
[12]On the evidence before me I am unable to find that the defenders directly succeeded to any business carried on on the leased ground by either Mr or Mrs Wyllie. The evidence points to an intervening partnership which, in my view, means that the defenders are not able to say that they were such a legal person as could succeed to a business carried on by a tenant as an individual in terms of leases one and two.
[13]At the date of the proof it was asserted by the defenders that they were the tenants in terms of the first two leases and that Mrs Wyllie as an individual was, despite the defender's occupancy and trading, the tenant under the second two leases. These assertions are not well founded in fact or law. The transfer of the first two leases above quoted are not ex facie in terms of the rights given to the executrix by statute. The statutory provisions do not envisage a transfer"in implement of a settlement".
The Law
[14]Prior to the passing of the Succession (Scotland) Act 1964, none of these leases would, because of their terms, have passed in any way to the executor. The present law is found in section 16 of the said Act, the relevant provisions of which are:
"Provisions relating to leases
16.-(1)This section applies to any interest, being the interest of a tenant under a lease, which is comprised in the estate of a deceased person and accordingly vested in the deceased's executor by virtue of section 14 of this Act; and in the following provisions of this section 'interest' means an interest to which this section applies.
(2)Where an interest -
(a) is not the subject of a valid bequest by the deceased, or
(b) is the subject of such a bequest, but the bequest is not accepted by the legatee, or
(c) being an interest under an agricultural lease, is the subject of such a bequest, but the bequest is declared null and void in pursuance of section 16 of the Act of 1886 or section 20 of the Act of 1949,
and there is among the conditions of the lease (whether expressly or by implication) a condition prohibiting assignation of the interest, the executor shall be entitled notwithstanding that condition, to transfer the interest to any one of the persons entitled to succeed to the deceased's intestate estate, or to claim legal rights or the prior rights of a surviving spouse out of the estate, in or towards satisfaction of that person's entitlement claim; but shall not be entitled to transfer the interest of any other person without the consent of the landlord.
(3)If in the case of any interest -
(a)at any time the executor is satisfied that the interest cannot be disposed of according to law and so informs the landlord,
or
(b) the interest is not so disposed of within a period of one year or such longer period as may be fixed by agreement between the landlord and the executor or, failing agreement, by the sheriff on summary application by the executor -
(i)in the case of an interest under an agricultural lease which is the subject of a petition to the Land Court under section 16 of the Act of 1886 or an application to the Court under section 20 of the Act of 1949, from the date of the determination or withdrawal of the petition or, as the case may be, the application.
(ii)in any other case, from the date of death of the deceased,
either the landlord or the executor may, on giving notice in accordance with the next following subsection to the other, terminate the lease in so far as it relates to the interest) notwithstanding any provision thereon or any enactment or rule of law, to the contrary effect."
Contentions for Pursuer.
[15]The blunt position adopted by counsel was that the defences were irrelevant. There had been no transmission of any lease either at common law, or by any compliance with the terms therein. Accordingly the only issue was whether in terms of the Succession (Scotland) Act the executor had competently transferred the interest in the leases to herself either as a residuary legatee or in satisfaction of prior rights. She had not done so within a year of the date of death and could not do so thereafter. This accords with the view of the law expressed by Lord Robertson in Lord Rotherwick's Trustees v Hope and Others 1975 SLT 187 and again by him and Lord Grieve in Gifford v Buchanan 1983 SLT 613.
[16]The proper construction of events which had taken place was that there was in place now a lease from year to year, the defenders after their incorporation having been allowed to possess and to remain in possession of the lands by the pursuer, analogous to the situation in Morrison Low v Patterson 1985 SC (HL) 49.
Contentions for Defenders
[17]On a proper construction of the Succession (Scotland) Act, section 16(3) did not provide a cut off or bar to an executor transferring as happened here, later than a year after the date of death. All that was provided by the statute was that a party to the lease was given a right to terminate it after the lapse of a year from the tenant's death. Section 16(2) was not limited as to time and accordingly the assignations and transfers by Mrs Wyllie were apt to transfer the tenants' rights in the leases. Lord Robertson's Opinion in the cases cited by the pursuer was obiter and should not be followed.
[18]Further and in any event the pursuer by his actings in accepting rent until 1990 and behaving as though a valid lease was in existence, together with not in fact terminating the lease in terms of the statute, constituted a waiver of that right.
Opinion
[19]Although the matter is not without difficulty the proper construction of S16 of Succession (Scotland) Act as applied to the events which have happened in the present case means that there is no relevant defence to any of the actions. Although no time limit is set by sub-section (2) it appears to me, for all the reasons which Lord Robertson clearly expressed, that an executor must act within the year. In all the leases assignees are excluded. In the first two it is said that consent to an assignation will not be refused to a partnership or limited liability company into which the business of the tenant is converted. No such conversion took place in the lifetime of the tenant. Consent to assignation would likewise not be refused to any person who took over the business by inheritance but only provided that the assignee was proved to the reasonable satisfaction of the proprietor to be a suitable tenant. No such proof has been given. In the second two leases all assignees are excluded simpliciter and there is no provision limiting the landlord's right to refuse assignations and further any consent had to be in writing. The deceased was bound by those terms expressly.
[20]The only way in which these provisions could be circumvented was by the use of the rights given in the said Act.
[21]When the year from death elapses, the landlord is entitled to act as he chooses with the lease, the vesting in the executor by s. 14 having nothing but administrative effect. An executor is not otherwise vested in the tenancy and cannot deal with it other than in terms of the statute. Accordingly an executor is not entitled to retain the interest in a lease without exercising the powers given by the Act to dispose of that interest. He is given a time limit and must obtain an extension of that time if that proves necessary. Since the only interest the executor has is administrative, when the time expired these leases could not be assigned.
[22]Lord Robertson's opinion as expressed in Gifford v Buchanan 1983 SLT at 616 is as follows,
"I regard section 16(3)(b) as setting out what is to happen if the interest is not 'so' disposed of (ie. as set out in section 16(2)). The period of one year may only become a longer period if there is an agreement between the landlord and the executor to extend it: and if the executor finds he cannot get the landlord to agree on the longer period, he may make a summary application to the sheriff to fix such a longer period. But in my opinion these are alternatives to the period of one year specified in the first part of section 16(3)(b). It is therefore incumbent in my opinion upon the executor to take such alternative steps before the one year period elapses, and if he fails to do so he will lose the opportunity."
Lord Grieve, although not dealing in detail with the argument, agreed with Lord Robertson's view. The Lord Justice Clerk felt able to dispose of the case on a different ground and held that he did not require to consider the argument which had addressed to the Court above referred to in the Opinion of Lord Robertson. In my opinion the matter as dealt with by Lord Robertson is compelling and with respect I follow it.
Waiver
[23]The defenders advanced an argument based on the proposition that by his conduct the pursuer had waived any right now to terminate the leases and was bound to comply with their whole terms by recognising the defenders as his tenant. The matters they founded upon, the acceptance of rent, the fact that some construction work had taken place which, it was said, was inconsistent with a year to year lease, meant that the pursuer had waived any right to issue a notice terminating the tenancy.
[24]In my opinion the actings of the pursuer do not amount to waiver of a right to issue a notice to quit to the defenders Those actings may amount to circumstances in which the pursuer would be barred from asserting that there was no tenancy at all but, when one has regard to the terms of the leases themselves, any suggestion of waiver would, it appears to me, give rise to strange results. The first two leases were originally granted to the deceased Mr Wyllie as an individual. Assignees were excluded without consent. Manifestly the landlord had at one time consented to a variation because a limited liability company appears to have been in right of the lease for some period prior to the express assignation of all four leases consented to by the landlord in writing in 1972. One effect of that assignation was that the right of the third and fourth leases which had originally been granted to the said limited liability company and which did not contemplate any succession at all (in contrast to the provisions of the first two leases), vested in Mr Wyllie. The net result was that Mr Wyllie was at his death the tenant under all four leases and had confirmed the applicability of each of the terms thereof. In relation to the latter two leases, this excluded any assignation without the written consent of the proprietor. There was and is no such written consent. There could therefore be no transfer of the 99 year lease to the widow if the Act was not to be invoked. Even if the widow did become tenant contrary to my opinion, there could be no assignation transfer or sublet to the defenders without written consent. The defenders have been in occupation and have paid a rent. So far as the defenders are concerned with the third and fourth leases there could only be a lease from year to year continued by tacit relocation. This, I find, is what has happened. In my judgment the defenders are in fact tenants of the lands described in the four leases but they hold that tenancy on a year to year basis only. I would in any event, not have considered that either the acceptance of rent (which both parties appear from the correspondence produced to have regarded as being inadequate) or the installation by the defenders of machinery in connection with the business they operated, were sufficient to impose upon the landlord the remainder of the original 99 year leases.
Conclusion
[25]The view I have taken of this complex situation is primarily that the executrix has failed, timeously, to transfer the deceased's interest under any of the leases in question. Further even if she had still the right to do so prior to the service of the notices to quit there has been no valid transfer in terms of the leases to the second defenders, who are being told to quit. The second defenders have never acquired any rights under the leases. They had been allowed to occupy and for a time paid rent to the pursuer. The pursuer is accordingly barred from asserting that the second defenders have no rights; they are tenants on a year to year basis. Likewise the widow, having engineered the second defender's occupancy cannot in my opinion now assert that she is the tenant under the third and fourth leases.
[26]I shall accordingly sustain the first, second and third pleas-in-law for the pursuer and grant decree de plano and repel the whole pleas-in-law for the defenders in each action.