For the appellant: Henderson; Thorley Stephenson (for McWhinney Richards, Airdrie)

For the respondent: Simpson; Brodies (for John G O'Donnell, Glasgow)

25 October 2007

Introduction

[1] The pursuer owns Braeside Farm, Moodiesburn. In 1989 the then proprietors of Braeside gave the defender an oral lease of Woodcroft Field, extending to 33.633 acres, which forms part of the farm. The lease ran from year to year. The anniversary date was 7 February. The subjects were let to the defender to be used by him for the business of a riding school. In connection with that business the defender was allowed to graze his horses on the subjects and to crop hay for their winter feed.

[2] Mr Leon Newman bought Braeside later that year. Thereafter the defender moved a static caravan onto the subjects and went to live there. He also erected sheds and placed some shipping containers on the land for the purposes of the riding school.

[3] In 1992 the pursuer bought Braeside from Mr Newman. He allowed the lease to continue. In 1994 a dispute arose between the parties about the defender's alleged breaches of his obligations to maintain and repair the subjects. The pursuer's solicitors served a notice to quit on the defender. The defender's solicitors contested it by counter-notice in terms of section 22(1) of the Agricultural Holdings (Scotland) Act 1991 (the 1991 Act). The pursuer applied to the Scottish Land Court for its consent to the operation of the notice to quit, but did not pursue the application.

[4] On 13 July 2004 the pursuer's solicitors served on the defender a notice to quit. This notice was not in the form required by section 21 of the 1991 Act. It referred to the defender's alleged breaches of the lease and intimated that the pursuer was terminating the lease on the ground that the breaches had not been remedied. It concluded as follows:

"In addition, since the current lease is held by you on a tacit relocation basis, our client gives you notice that he intends to terminate the lease as at the 31st of March, 2005 at the latest."

[5] Counsel agree that the subjects consist of two fields. On the first field there are the caravan, the sheds and the containers. The riding tuition takes place on this field. It is set out with jumps. The second field was formerly used for the growing of the hay. In recent years the horses have grazed on it. At January 2006 the defender had ten horses grazing there. Although the riding school operated seven days a week, most of the teaching was done at weekends.

The action

[6] This is an action of declarator and removing. The declarators sought need not concern us. The crave for removing is founded on the notice to quit of 13 July 2004. The principal line of defence is that the subjects are an agricultural holding within the meaning of the 1991 Act and therefore that the notice to quit is invalid.

The legislation

[7] The relevant provisions of the 1991 Act are as follows.

"1(1) In this Act ... 'agricultural holding' means the aggregate of the agricultural land comprised in a lease, not being a lease under which the land is let to the tenant during his continuance in any office, appointment or employment held under the landlord.

(2) In this section ... 'agricultural land' means land used for agriculture for the purposes of a trade or business ... " ...

85(1) In this Act, unless the context otherwise requires -

... 'agriculture' includes horticulture, fruit growing; seed growing; dairy farming; livestock breeding and keeping; the use of land as grazing land, meadow land, osier land, market gardens and nursery grounds; and the use of land for woodlands where that use is ancillary to the farming of land for other agricultural purposes; and 'agricultural' shall be construed accordingly ...

'livestock' includes any creature kept for the production of food, wool, skins or fur, or for the purpose of its use in the farming of land ... "

The sheriff's decision and reasoning

[8] Sheriff JC Morris QC held a proof before answer at Airdrie sheriff court. By interlocutor dated 10 January 2006 he held inter alia that the lease was a lease of an agricultural holding and that the notice to quit specified the wrong date of ish, namely 31 March instead of 7 February. He assoilzied the defender.

[9] The sheriff found that the permission to the defender to graze his horses and to crop hay for winter feed was given "in connection with" the business of the riding school (finding in fact 6). He also found that "the purpose of the lease was for the running of a riding school with an entitlement to graze the horses on the subjects and to crop hay for the winter feed of the same" (finding in fact 17). In view of his findings that the defender's horses grazed on both fields, the sheriff concluded that the defender was using the subjects as "grazing land." That, in his view, came within the definition of agriculture in the 1991 Act (s 85(1), sv "agriculture," supra). Furthermore, the defender was using the land for the purposes of the "trade or business" (s 1(2), supra) of a riding school. On both of these points, the sheriff based his decision on Rutherford v Maurer ([1962] 1 QB 16), which was followed in Scotland in Crawford v Dun (1981 SLT (Sh Ct) 66). These are in essence the submissions for the appellant.

[10] In findings 21 and 22 the sheriff found that since most of the tuition was done at weekends, the horses spent most of their time grazing and that at that time the horses were grazing on the second field during the winter. He concluded his findings in fact with the following finding:

"23 That the subjects are used to a substantial extent for the grazing of horses, consequently the predominant use of the subjects is for an agricultural purpose."

[11] On the view taken by the sheriff, the other questions in the case were superseded, but he indicated inter alia that if the lease was not an agricultural lease, the notice of 13 July 2004 would have effectively terminated it "certainly after 7 February 2006 and arguably after 7 February 2005."

The sheriff principal's decision and reasoning

[12] By interlocutor dated 24 August 2006 Sheriff Principal BA Lockhart allowed an appeal by the pursuer and inter alia granted decree of removing.

[13] Relying on Howkins v Jardine ([1951] 1 KB 614, Jenkins LJ at p 628), the sheriff principal considered that the important question was to identify the substantial purpose of the lease. He considered that that test had been applied in Monson v Bound ([1954] 1 WLR 1321) and Deith v Brown ((1956) 167 EG 513). He distinguished Rutherford v Maurer because the purpose of the let in that case was for grazing horses and was therefore, in his view, agricultural. The point in that case was whether "the purposes of a trade or business" required to be agricultural purposes. Rutherford v Maurer was not inconsistent with the three cases to which he had referred. The sheriff principal also distinguished Crawford v Dun (supra). It related to a question of resumption and the interpretation of the forerunner of section 21(7) of the 1991 Act.

[14] Taking this approach, the sheriff principal held that the substantial purpose of lease was for the non-agricultural use of the subjects as a riding school.

[15] On the question of the notice to quit dated 13 July 2004 the sheriff principal took a similar approach to that of the sheriff. That notice made clear that the pursuer was not prepared to countenance a continuation of the lease. That was sufficient to prevent the operation of tacit relocation at the next anniversary, namely 7 February 2005. Although the notice gave the wrong date of ish, it gave the defender 6 months and 23 days notice that the lease would not be renewed at the next anniversary. There was no prescribed form of notice in a common law action of removing. The notice effectively terminated the lease. If he was wrong in that conclusion, he agreed with the sheriff's view that the lease was certainly terminated at 7 February 2006.

[16] These are in essence the submissions for the respondent.

The appeal and the cross appeal

[17] The defender has appealed against the interlocutor of the sheriff principal on the basis that the sheriff's interlocutor should be restored simpliciter. The respondent has cross appealed against the interlocutor of the sheriff principal on the basis that it leaves undisturbed the sheriff's purported finding of fact 23 (supra) which, so long as it remains unaltered, stands in the way of a finding that the subjects are not an agricultural holding.

Conclusions

(1) Are the subjects an agricultural holding?

[18] In my opinion, the approach of the sheriff principal is correct. If the lease is to constitute a lease of an agricultural holding, the land in question must be land used for agriculture (1991 Act, s 1(2)). But in the absence of a statutory provision to the contrary, the tenant may use the land only for the purpose for which the lease is granted. The subjects in this case were let for the purpose of their being used for the operation of a riding school. That purpose, it is agreed, was non-agricultural. The permission that the lease conferred on the defender to graze his horses on the subjects does not, in my opinion, affect that conclusion.

[19] It is obvious from the sheriff's findings 6 and 17 (supra) that the grazing and cropping were ancillary to, and dependent on, the operation of the riding school. In these circumstances they should not, in my view, be regarded as agricultural uses of the land.

[20] I shall assume for the present that the grazing of land by any kind of animal constitutes agriculture, a point to which I shall return. Even on that assumption, I consider that the entitlement of the defender to graze his horses and to crop hay for their feed was only a subordinate element of the commercial purpose of the tenancy.

[21] On the view that I have taken, it is the purpose of the lease that defines the nature of the tenancy at the outset. It is possible that actual use may later become relevant; for example, if the tenant substantially abandons agricultural use of the holding (eg Wetherall v Smith [1980] 1 WLR 1290; Hickson and Welch v Cann (1977) 40 P & CR 218). In this case, however, the originally agreed use has continued throughout. Therefore, even if actual use were to be the criterion, it is clear that the character of the let in this case remains commercial.

[22] On my interpretation of the sheriff's findings 6 and 17, I cannot accept his finding 23 (supra). It is a finding of mixed fact and law. In that finding the sheriff concluded that the subjects were used "to a substantial extent" for the grazing of the horses largely on the basis that the horses grazed all the time, whereas the riding school was operated mainly at weekends. He therefore saw grazing as being the predominant use. That, in my view, is a fallacious approach. The grazing was part of a commercial enterprise. The land was grazed only because the horses were part of that enterprise. Therefore, no matter how extensive the amount of the grazing, the grazing was always ancillary to the commercial purpose of the lease. The sheriff erred, in my opinion, in concluding that grazing was the predominant use. This is clearly a commercial lease.

[23] The sheriff's finding 23 was not disturbed by the sheriff principal. Since it is essential that we should put it right, I think that we should substitute the following finding:

"23 That the grazing of the subjects by the defender's horses is ancillary to the defender's use of the subjects for the operation of a riding school. The purpose of the let, and the use of the subjects, taken as a whole, is commercial."

On this view, it follows that the sheriff's findings in law, the most important of which was that the tenancy was an agricultural tenancy in terms of the 1991 Act, were unsound. The sheriff principal was right, in my view, to set them aside by sustaining the pursuer's pleas in law to the extent that he did.

[24] Counsel referred us to two cases involving leases of land for commercial activities involving horses. In McClinton v McFall ((1974) 232 EG 707) an area of 56 acres was let on what bore to be an agricultural tenancy with permission to the tenant to run a stud farm. The tenant grazed stallions, mares and foals on the land and cropped hay, all for the purposes of the stud farm. He allowed a farmer to have summer grazing for 10 to 20 cattle in exchange for his topping and fertilising the land. The Court of Appeal decided that the uses of the land for the pasturing of the cattle, the grazing of the horses and the making of hay were agricultural and that the other activities in connection with the stud farm were not inconsistent with, and did not impede, the agricultural uses. Such non-agricultural uses therefore did not prevent the land from being agricultural land within the corresponding English definition. I find the logic of this decision unconvincing; but it may be that it can be distinguished on the basis that the tenancy was expressly granted as an agricultural tenancy and that the running of a stud farm was a permissible rather than an obligatory use of the land.

[25] In Deith v Brown (supra) the tenant ran a riding school on the subjects of let, which included a cottage, stables, outbuildings and 12 acres of land. She also kept some poultry and pigs. According to her own evidence, she had several acres under tillage, had sold oats as well as feeding them to her ponies and had sold eggs. She claimed an agricultural tenancy. Pearce J said that the primary consideration was the substantial purpose for which the premises were let. Looking at that purpose, he held that the tenancy was not agricultural. Compared with the takings from the riding school, the takings from all other sources were trivial. In any event, he doubted whether these matters were proper to be considered. I agree with the approach taken by Pearce J in that case. The same approach was taken by the Court of Appeal on a similar question in Russell v Booker ((1982) 263 EG 513).

[26] The case for the defender has throughout been founded on the decision of the Court of Appeal in Rutherford v Maurer (supra), which was followed by the sheriff principal in Crawford v Dun (supra). The sheriff considered himself bound by that decision. In my opinion, Rutherford v Maurer is materially distinguishable from the present case and cannot form a proper basis for our decision. In Rutherford v Maurer, a field was let to the owner of a riding school for the grazing of his horses; but the riding school itself was situated elsewhere. The lease forbade the use of the field for riding or any other purposes. Grazing was therefore the sole purpose of the lease. In this case the purpose of the lease is commercial.

[27] Since I am of the view that the land in this case was neither let nor used for agriculture, that is sufficient to dispose of the appeal. If I am right, it follows that we need not decide either of the two questions raised by Rutherford v Maurer (supra); namely, whether the grazing of land by animals of any kind constitutes agriculture, and whether the trade or business to which the statutory definition refers must be agricultural. However, since the sheriff followed Rutherford v Maurer on the former point, and since counsel for the appellant has submitted that Rutherford v Maurer decided it correctly, I should say that I take a different view.

[28] In Rutherford v Maurer (supra) the horses that were to be grazed on the field were not "livestock" within the statutory definition, which was the same as the definition in section 85(1) (supra). The Court of Appeal's reasoning was that because the definition of agriculture included "the use of the land as grazing land" and because the field in question was used for grazing, the field was therefore used for agriculture (eg Willmer LJ at p 28). That, in my view, is a non sequitur. Because agriculture includes grazing, it does not follow that all forms of grazing constitute agriculture. In my opinion, the grazing to which the definition refers should not be considered in isolation. It has to be seen in the context of the various activities that the definition is said to include and in the context of the definition of livestock (supra). If the decision in Rutherford v Maurer was sound, it would follow that if a commercial zoo were to be given a tenancy of ground for the grazing of camels, the lease would be a lease of an agricultural holding. That conclusion, I suggest, is not in accordance with common sense.

[29] I find support for the view that I have taken in the reasoning of the Lands Valuation Appeal Court on a similar point, although on different legislation, in Forth Stud Ltd v Ass for East Lothian (1969 SC 1), where it rejected a claim by a stud farm for the agricultural exemption from rating. I also find support in the decision of the Divisional Court in Belmont Farms Ltd v Minister of Housing and Local Government ((1962) 13 P & CR 417). In that case the court rejected the contention that the proposed use of part of a farm for the breeding of horses and the exercise and training of them for showjumping would constitute agriculture under the similar definition of agriculture in the Town and Country Planning Act 1947.

[30] Crawford v Dun (supra) related to the validity of a proposed resumption of part of a holding for use as a riding school. That question depended on whether the proposed use was non-agricultural. The case is distinguishable in this respect; but since the sheriff principal decided that case on the view that the grazing of the resumption land by horses used in the riding school would constitute agriculture, I consider that the case was wrongly decided.

(2) Is the notice invalidated by the date of removal?

[31] The notice to quit specified 31 March 2005 as the date of removal. The specification of that date was based on a letter to the defender from Mr Newman's solicitors dated 23 March 1990 by which they made an offer of let to him from 1 April 1990. The sheriff found that that letter was of no effect and that the true anniversary date was 5 February. Counsel for the defender submitted that even if he was wrong on the primary question, the action must nonetheless fail because the pursuer had no record for a removing based on a termination of the lease at any date other than 31 March 2005.

[32] If this had been a tenancy of an agricultural holding, the pursuer's notice to quit would have been invalid. But since the lease in this case was, in my opinion, a commercial lease running from year to year, relocation could be prevented in any given year by any overt intimation by either party that he did not consent to the prolongation of the lease (Signet Group plc and C & J Clark Retail Properties Ltd, 1996 SC 444).

[33] The pursuer's notice to quit constituted such an intimation. Whatever the specified date of ish, it notified the defender that the pursuer would not consent to a prolongation for a further year. It was not suggested by the counsel for the defender that the period of notice was insufficient; and since the notice specified a date of removal that was later than the true anniversary date, the defender was not prejudiced in any way by the error.

[34] In my opinion, counsel for the pursuer did not require to amend his pleadings expressly to aver the date found by the sheriff to be the correct anniversary. The pursuer's acceptance of that date in consequence of the sheriff's findings was no more than a variation or modification of his case on record. It was not a fundamentally new case. (Burns v Dixon's Iron Works Ltd 1961 SC 102). Nevertheless, counsel for the pursuer moved for leave to amend to the effect that if the lease ran to 7 February in each year, the notice was effective to terminate it at 7 February 2005, et separatim 7 February 2006. That issue was thoroughly aired before the sheriff; counsel for the defender could not suggest that the defender was in the least way prejudiced by the proposed amendment, and on any view the date of ish is now long past. I can see no reason to refuse the amendment.

Decision

[35] I propose (1) that we should allow the Record to be amended in the terms proposed by counsel for the pursuer; (2) that we should vary the sheriff's findings in fact by substituting a new finding 23 in the terms that I have proposed; (3) that we should vary the interlocutor of the sheriff principal to the extent of making that substitution; and (4) that we should refuse the appeal and allow the cross appeal.

For the appellant: Henderson; Thorley Stephenson (for McWhinney Richards, Airdrie)

For the respondent: Simpson; Brodies (for John G O'Donnell, Glasgow)

25 October 2007

[36] For the reasons given by your Lordship in the chair I agree that the amendment proposed by counsel for the pursuer should be allowed, that the sheriff's interlocutor should be varied by substitution of a new finding 23 as proposed, that the court should adhere to the interlocutor of the sheriff principal, and that the appeal should be refused and the cross appeal allowed.

For the appellant: Henderson; Thorley Stephenson (for McWhinney Richards, Airdrie)

For the respondent: Simpson; Brodies (for John G O'Donnell, Glasgow)

25 October 2007

[37] I agree with your Lordship in the chair and with the course proposed, and have nothing to add