Inner House upholds order for liquidator to sell farmland to tenants in long-running agricultural tenancy dispute

About this case:

• Citation:
  [2023] CSIH 16
• Judgment:
  External link
• Court:
  Court of Session Inner House
• Judge:
  Lord Malcolm

Appellants Joseph and Donalda Sweeney, who had been involved in a long-running dispute with their tenants Amanda and Deanna Urquhart over land at Leachkin Brae, Inverness. The reclaimers argued that the Lord Ordinary had erred in holding they had no title or interest to challenge the registration of intention to buy.

The appeal was heard by the Lord Justice Clerk, Lady Dorrian, along with Lord Malcolm and Lord Woolman. O’Brien KC appeared for the reclaimers and the Dean of Faculty, Dunlop KC, appeared for the original noters and respondents.

Odd to have no remedy

In 2006, the Urquharts registered a notice of interest in acquiring the land at Leachkin Brae under the relevant terms of the Agricultural Holdings (Scotland) Act 2003, and subsequently renewed it regularly to stop it from expiring. Following the liquidation of West Larkin Ltd, a company controlled by the Sweeneys that owned the land, the liquidator gave notice under the Act of a proposal to transfer the land, met by timeous counter-notice of the tenants’ intention to purchase.

Following a change of liquidator, the Sweeneys contested the validity of the Urquharts’ interest in buying the land, arguing they were likely to suffer prejudice as creditors of the company if the land was sold at a reduced value. They sought a proof establishing that any agricultural tenancy had ended by 2015 and thus the 2016 registration of intention to purchase was invalid.

After debate, the Lord Ordinary directed the liquidators to sell the land to the Urquharts, who had maintained that the lease continued by way of tacit relocation and the requisite notices creating an enforceable right to buy had been exchanged with the previous liquidator. The Sweeneys, as third parties to the lease, could not challenge the registration under section 25(1) of the Act.

It was submitted for the reclaimers that they had title and interest to sue as contributories to and creditors of the company, failing which the liquidator ought to be afforded an opportunity to consider a challenge. A challenge to registration could not be exclusive to the owner of the land, as others such as a holder of a standard security or a party with a competing claim may have an interest, and it would be odd if such a person had no remedy in the ordinary courts.

Wholly undermined

Lord Malcolm, delivering the opinion of the court, began: “We agree with the judgment of the Lord Ordinary. Part 2 of the 2003 Act provides a coherent self-contained statutory scheme. If the Sweeneys’ submissions are correct it would be wholly undermined. It provides certainty and achieves an appropriate balance between the respective competing interests.”

He continued: “The owner and the Urquharts exchanged the requisite notice and counter-notice. The Urquharts now enjoy an enforceable right to buy in terms of the valuation provisions in the Act. It would now be too late for the owner to try to avoid this by raising a challenge under section 25(8). If, contrary to our view, an interested third party did have standing to dispute the registration, likewise it would be trumped by the tenants’ right to buy. A standard security holder’s position is protected, but even he could not sit on his hands and then at the eleventh hour seek to intervene.”

Addressing the reclaimers’ submission that the statute produced a strange result, Lord Malcolm said: “There is nothing inherently wrong or nonsensical in the proposition that an owner or a third party might be able to prove that there has never been a tenancy or that it has ended, but nonetheless an extant registered interest plus the operation of the notice provisions has created an enforceable right to purchase. In other words, a tenant’s right to buy is a statutory right wholly dependent on an application of the scheme in Part 2 of the Act.”

He concluded: “It can be assumed that the restriction on those permitted to challenge a registration was deliberate. If an owner neglects his own interests then he must take the consequences. It does not open a route for others claiming to be adversely affected to interfere.”

The reclaiming motion was therefore refused, with Lord Malcolm adding in postscript: “The court hopes that it is not overly optimistic to expect that this will mark the end of litigious disputes between these families over this area of land.”