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Professional briefing Agriculture
Tackling
improvements
The Land Court has clarified the approach to be adopted
in considering tenants’ proposed part II improvements
Practitioners will know that, to
preserve his right to compensation at
waygo, the tenant of an agricultural
holding requires to give notice, under
s 38(1) of the Agricultural Holdings
(Scotland) Act 1991, “of his intention
to carry out… [an improvement]…
and of the manner in which he
proposes to do so”. Section 39 allows
the landlord to give counter-notice
objecting to the improvement or the
manner in which it is to be carried
out. The tenant may then seek the
Land Court’s approval of the
proposed improvement. This may be
given unconditionally or on terms
(including a reduction in the potential
compensation), or withheld.
These provisions were considered
by the court in R & M Whiteford v
Trustees for Cowhill Trust (Application
RN SLC/174/08), 29 July 2009.
Messrs Whiteford, a limited
partnership, were tenants of four
Dumfriesshire farms collectively
known as “Abbey Farm” and two
further holdings, under a 40 year
lease from 1987. They ran the
holding collectively as a dairy farm.
They served notice of their intention
to install a “voluntary milking
system” (VMS), comprising a number
of robotic milking units. Following a
counter-notice they applied to the
court for approval.
Defective notice?
The landlords argued (i) that the
tenants’ notice was so deficient in its
description of the work and how it
was to be carried out that it was
invalid; and (ii) that the improvement
would lead to over-capitalisation of
the holding. The notice was attacked
on several fronts, including that it did
not disclose the number of VMS units
proposed and, to summarise, that
discrepancies on methodology
46 / theJournal December 09
between the notice, a later notice
(subsequently withdrawn) and the
planning application made it
impossible for them to know the
tenants’ true intentions.
The court held that, in deciding on
the validity of a s 38 notice, it could not
look beyond the four corners of the
notice itself. The only criticism in that
respect was failure to specify the
number of units, which the court
regarded as a point of detail, given that
it was clear what kind of system was to
be installed. (The omission was made
good on the evidence, but this did not
sway the court.) It did, however,
observe that it is in the tenant’s interests
to make a notice full and detailed, not
only to avoid it being challenged as
such but to avoid the risk that some
element of the improvement is not
eligible for compensation at outgo,
because the landlord has been
given insufficient notice.
Test for approval
On the landlords’ second objection,
the court held that the test in
The court
viewed this as
an objective
test to be
applied without
regard for what
it thought the
applicants
should be
doing or
might do
instead
assessing whether it should approve
(unconditionally or on terms) or
disapprove an improvement was the
formulation in Gill, Agricultural
Holdings (3rd ed), distilling previous
case law: whether it was “reasonable
and desirable” on agricultural
grounds for the efficient
management of the holding.
The court viewed this as an objective
test to be applied without regard for
what it thought the applicants should
be doing or might do instead. In any
given situation there might be a range
of possibilities (from “adventurous” to
“safe”), all of which were reasonable.
However, it then appeared to contradict
itself by observing obiter that it was
entitled to refuse consent if, in all the
circumstances (including the
availability of the alternative), it
considered that there was an alternative
which was clearly preferable to the
tenant’s proposal, albeit both were
reasonable on their own terms.
Although the court found that the VMS
was not the only means available for
improving the efficiency of Whitefords’
dairy enterprise and that what was
proposed was financially the more
risky of the options available, it was
nevertheless reasonable and desirable
on agricultural grounds for the efficient
management of the holding and,
accordingly, should be approved.
As a subsidiary issue, the landlords
argued for a reduction in the tenants’
ultimate claim for compensation,
since a clause in the lease that the two
holdings were to be used “as livestock
and cropping units” meant that the
court, in applying the reasonable and
desirable test, had to confine itself to
Abbey Farm: the other units could
not be used for grazing dairy stock, or
growing feed for dairy cattle
elsewhere, and could, accordingly,
not be taken into account in assessing
the carrying capacity of the holding
for dairy purposes. The court,
however, inferred that the restriction
prohibited use as dairy units as such,
but not use for anything to do with
dairying, however remotely, and
grazing and cropping for dairy stock
was permitted.
The case, accordingly, covered a
wide range of interesting points – in
particular the court’s exposition of the
test to be applied to a proposed
improvement and its observation on
the framing of a tenant’s notice in
order to preserve the right to
compensation, although this restates
what I have always understood to be
best advice.
Alasdair G Fox, Anderson Strathern LLP
www.journalonline.co.uk