SECOND DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lord Kingarth Lord Hardie	[2010] CSIH 21 OPINION OF THE LORD JUSTICE CLERK in the Appeal by THE MOUNT STUART TRUST Landlord and Appellant against HUGH ROBERTSON CARTER McCULLOCH Tenant and Respondent Against an Order of the Scottish Land Court dated 26 February 2009 _______

For the landlord: J G Reid, QC; Turcan Connell

For the tenant: Sir Crispin Agnew of Lochnaw QC; Morton Fraser

25 March 2010

Introduction

[1] This is an appeal from an Order of the Scottish Land Court relating to the holding of Kilmichael, Bute, of which the appellant and the respondent are respectively landlord and tenant. The lease was entered into in 1987.

[2] The lease provides that the rent is payable at Whitsunday and Martinmas, with a fifth part more of each term's payment as liquidate penalty in the event of failure in punctual payment. The lease also provides for payment of rent and of interest as follows.

"[T]he Tenant shall not be entitled to withhold or consign any payment of rent ... payable by the Tenant to the Proprietors in terms hereof or of any agreement to follow hereon or otherwise on account of any claim which the Tenant may have against the Proprietors or for any other reason whatsoever it being specifically agreed that the rent shall be paid at the due terms hereinbefore specified ... notwithstanding any such claims ... DECLARING that in the event of the Tenant failing to make any such payment of rent ... on the date upon which the same becomes due (which in the case of rent shall be the aforesaid terms...) he shall be bound to pay interest thereon to the Proprietors at a rate of five percentage points above the base rate of the Bank of Scotland in force from time to time from the date upon which payment becomes due as aforesaid until payment thereof and such interest shall be recoverable as if the same were rent in arrears and due under this lease ... "

There is an irritancy clause which, so far as relevant, is in the following terms:

"[In] the event of the Tenant during this lease (a) becoming apparently insolvent or divesting himself of his estate and effects by trust deed for creditors or otherwise or diligence is performed against the Tenant or his goods ... and remains undischarged after a period of seven days or (b) failing to reside personally in the farmhouse or (c) assigning this lease or sub-letting the Farm or any part of it without the consent of the Proprietors in writing or (d) allowing one half-year's rent to remain unpaid after it has become due or (e) failing to have a sufficient stock on the Farm which shall be bona fide the Tenant's own property or (f) failing to cultivate and manage the Farm according to the rules of good husbandry and in accordance with the provisions hereof or (g) using any part of the land or buildings for a purpose other than agricultural or pastoral or except in accordance with the provisions hereof or (h) failing to fulfil any of the remaining obligations incumbent upon the Tenant in terms of this lease or of any agreement to follow hereon then and in any of these events and without prejudice to any other remedy competent to the Proprietors it shall be in the power of the Proprietors (provided always that in the case of an alleged breach which is capable of being remedied by the Proprietors of their fact have first served written notice on the Tenant by recorded delivery post requiring the Tenant to remedy the alleged breach within a period of two months from the date of the said notice and the Tenant has failed to remedy same) by written intimation addressed to the Tenant ... forthwith to put an end to this lease and immediately to resume possession of the Farm ... "

The rent review

Section 13 of the Agricultural Holdings (Scotland) Act 1991 (the 1991 Act)

[3] Section 13 provides inter alia as follows:

"13 (1) Subject to subsection (8) below, the landlord or the tenant of an agricultural holding may, whether the tenancy was created before or after the commencement of this Act have determined by the Land Court the question what rent should be payable in respect of the holding as from the next day after the date of the notice on which the tenancy could have been terminated by notice to quit (or notice of intention to quit) given on that date.

(2) In relation to such a question, the Land Court shall determine, in accordance with subsections (3) to (7A) below the rent properly payable in respect of the holding as from the "next day" mentioned in subsection (1) above ... "

[4] In 2004 the tenant applied to the Land Court in terms of this provision for a determination of the rent that should be payable as from Whitsunday 2004. That determination has yet to be made.

The Whitsunday 2008 rent payment

[5] The tenant failed to pay rent at Whitsunday 2008. The landlord did not serve a notice requiring payment of the allegedly outstanding sum within two months from the due date. Instead, on 16 July 2008 the landlord served a notice of irritancy.

The present proceedings

[6] The landlord applied to the Land Court for a declarator of irritancy and for an order for the removal of the tenant. The tenant opposed the application on two grounds. The first was that at Whitsunday 2008 no rent was payable by him because the review date had passed and the new rent had yet to be determined. The second was that even if the tenant's failure to pay at Whitsunday was a breach of the lease, the breach was remediable. Therefore, since the landlord failed to serve a notice to remedy, the irritancy was not enforceable.

The Land Court Order

[7] By Order dated 26 February 2009 the Land Court found for the landlord on the section 13 point, but found for the tenant on the remediability point. The landlord has appealed against the Order and the tenant has cross-appealed. If the appeal fails, the cross-appeal does not arise; so I shall deal with the appeal first.

Conclusions

The remediability point

[8] The submission for the landlord is that the essence of the tenant's obligation under the rent clause is not merely to pay the rent, but to pay it at the due date. Therefore, when the due date passed, the obligation could no longer be complied with and the breach was irremediable. Counsel for the landlord argued that the breaches referred to in heads (a) (insolvency undischarged after seven days) and (d) (failure to pay on the due date) of the irritancy clause were one-off events governed by a specific timing provision on the expiry of which the breach became irremediable; whereas those referred to in heads (b), (c) and (e) to (h) were continuing breaches and were therefore remediable.

[9] In my opinion, that is a false distinction. There is no hard and fast criterion by which a breach can be said to be irremediable. It cannot be the case that a breach is remediable if it could be put right only if time and money were no object or if the likelihood of its being put right, though conceivable, is fanciful. I agree with the views of Muir Watt and Moss that in every case the question of remediability must be approached in a commonsense way (Agricultural Holdings, 14th ed, paras 12.61.16; 12.76.1). In many cases, I should think, the question could be decided only after proof. A breach under head (f) could be irremediable; for example, if a building became ruinous through lack of maintenance. A breach of a lease obligation under the catch-all provision in head (h) could be irremediable; for example, if the tenant were to fell timber.

[10] The present case, in my view, can be decided on a construction of the rent clause and the irritancy clause, when read together. In my opinion, these clauses imply that a failure to pay the rent punctually will be remediable by means of late payment, subject to a liability for penalty and interest. I agree with the conclusion of the Land Court. On that view, the landlord's power to irritate the lease is qualified in this case by the prior requirement to serve a notice to pay.

[11] If the landlord had sought the power to irritate not merely for failure to pay but for failure to pay on the due date, it could have provided expressly in the lease that that power would emerge on that date without any requirement of a notice to pay. That consideration confirms me in the conclusion that I have reached.

[12] The Land Court found support for its conclusion in an obiter dictum of Lord Penrose, on the construction of a similar clause, on the remediability of a fall into receivership (Aubrey Investments Ltd v D S Crawford Ltd (in receivership), 1998 SLT 628). Counsel for the tenant referred to the decision of the Court of Appeal on the construction of an option clause in a commercial lease in Bass Holdings Ltd v Morton Music Ltd ([1988] Ch 493). I do not think that these cases are of any direct relevance to this appeal.

[13] The Land Court relied on the decision of the Court of Appeal in Expert Clothing Service and Sales Ltd v Hillgate House Ltd ([1986] Ch 340) on the interpretation of section 146 of the Law of Property Act 1925. Although cases on forfeiture under that provision may have to be approached with caution in the interpretation of a Scottish lease (cf HMV Fields Properties Ltd v Bracken Self Selection Fabrics Ltd, 1991 SLT 31), I agree that that decision supports the Land Court's view. In that case the tenant was subject to a covenant that certain reconstruction work would be substantially completed by or before 28 September 1982. The question was whether a breach of that covenant was "capable of remedy." It was common ground that the breach had been a once and for all breach. Counsel for the landlord put forward a rather similar argument to that of counsel for the landlord in this case to the effect that since the covenant was time-limited, a breach of it was incapable of being remedied. The Court of Appeal held that the breach could not be said to be incapable of remedy merely because it was not a continuing breach; and that where the landlord had suffered no irremediable loss in consequence of it, it was open to the tenant to remedy the breach within a reasonable time. It is not suggested in this case that the landlord suffered any irremediable loss in consequence of the late tendering of the rent.

[14] I conclude therefore that the appeal fails.

The section 13 point

[15] On the view that I have taken on the landlord's appeal, the cross-appeal does not arise. However, since the Land Court has expressed the conclusion, on the admitted facts and after a full hearing, that the tenant's section 13 point is unsound, I should say that I agree.

[16] The submission for the tenant is that since the question under section 13 as to the rent to be payable from Whitsunday 2004, the review date, remained unresolved at Whitsunday 2008, the date of the alleged failure to pay, the extent of the tenant's liability for rent as from the review date had yet to be determined. That liability was therefore illiquid and unascertained. Therefore, while there was a continuing obligation to pay rent, at that date none could be said to be due (Ersk, Inst. III. 1. 6; Gloag, Contract, 2nd ed, pp 645-6). If this remarkable proposition were right, the effect of it would be that if a determination under section 13 were not concluded by the review date, as is often the case, the tenant would retain occupation of the holding pending the determination, but without there being any rent due and payable in respect of it.

[17] In my opinion, the proposition for the tenant rests on a misinterpretation of section 13. The Land Court can make a determination under section 13 only if either party applies for it (cf s 13(1), supra). The application has no effect on the current rent. It does not create a liability of any kind. It merely creates the contingency that if it is pursued to a conclusion, the Land Court may vary the rent. The applicant may abandon it. In my view, the current rent continues to apply unless and until it is varied, whether by agreement or by an order of the Land Court. If it is varied by the Court, the order will have effect from the review date. There will therefore be a liability on one or other party to make an adjusting payment in light of the rents paid while the application was in dependence.

[18] Counsel for the tenant submitted that a tenant could not be burdened by an immediate liability to pay at the current rate when there was the prospect that the rent would be reduced by the Land Court when it made its determination. I think that that argument is fallacious. The duty of the Land Court is to determine the rent that is "properly payable" by applying the valuation principles and criteria set out in section 13. The Land Court can fix a rent that is outside the parties' figures. Where the tenant seeks to have the rent reduced, it may even be persuaded to increase it.

[19] If the point had arisen, I would have concluded that the cross-appeal should be refused.

Disposal

[20] I propose to your Lordships that we should refuse the appeal and continue the case for 14 days for any motion that may be enrolled concerning the expenses of the appeal and cross-appeal; and thereafter return the case to the Land Court to deal with the question of the expenses in that court.

SECOND DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lord Kingarth Lord Hardie	[2010] CSIH 21 OPINION OF LORD KINGARTH in the Appeal by THE MOUNT STUART TRUST Landlord and Appellant against HUGH ROBERTSON CARTER McCULLOCH Tenant and Respondent Against an Order of the Scottish Land Court dated 26 February 2009 _______

For the landlord: J G Reid, QC; Turcan Connell

For the tenant: Sir Crispin Agnew of Lochnaw QC; Morton Fraser

25 March 2010

[21] I agree with the opinion of your Lordship in the chair.

[22] I would only add briefly that even if there was thought to be substance in the distinction which the landlord has sought to draw between continuing (and thus remediable) breaches and others, it seems to me that the way the relevant part of the irritancy clause is phrased ("(d) allowing one half-year's rent to remain unpaid after it has become due ...") is entirely consistent with the notion of a breach of the former category.

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lord Kingarth Lord Hardie	[2010] CSIH 21 OPINION OF LORD HARDIE In the Appeal by THE MOUNT STUART TRUST Landlord and Appellant; against HUGH ROBERTSON CARTER McCULLOCH Tenant and Respondent: Against an Order of the Scottish Land Court dated 26 February 2009 _______

For the landlord: J G Reid QC; Turcan Connell

For the tenant: Sir Crispin Agnew of Lochnaw QC; Morton Fraser

25 March 2010

[23] For the reasons given by your Lordship in the chair I agree with the disposal proposed and have nothing to add.