NOTE

Emslie v Scottish Ministers

[1] The applicant is the heritable proprietor of a house, “Seven Acres”, and some 11 hectares of adjacent land at Hill of Menie, Balmedie near Ellon. A substantial part of her property, is to be taken by way of compulsory purchase. By the appropriate counter-notice she claimed that the remaining subjects were not reasonably capable of being farmed as a separate agricultural unit and purported to require the respondents as acquiring authority, to purchase her interest in the whole property. They rejected the notice on the basis that the subjects did not comprise a valid agricultural unit. As will be seen, we have decided that the evidence does not support the proposition that the whole subjects can properly be described as an agricultural unit within the meaning of the relevant legislation. The critical element in our decision is that we reject the contention that the matter can be decided by reference to the potential, as opposed to existing, use of the land.

[2] At the hearing on 17 December 2013, the applicant, Ms Isobel M Emslie, was represented by Mr Alasdair Burnet, advocate, and the acquiring authority by Mr David Sheldon QC. Ms Emslie gave evidence herself and also relied on an affidavit from Mr Andrew Bruce, a local farmer. Mr Burnet tendered an affidavit from Mr Keith J Petrie, FRICS relating to valuation but did not require to rely on it for the present purposes. Mr Sheldon tendered an affidavit from Ms Yvonne Leslie, a Senior Surveyor with the Valuation Office Agency.

Statutory material

Land Compensation (Scotland) 1973
Agriculture (Scotland) Act 1948
Town and Country Planning (Scotland) Act 1997

Section 49 of the 1973 Act includes the following provisions:

(1) Where an acquiring authority serve notice to treat in respect of any agricultural land on a person (whether in occupation or not) having a greater interest in the land than as tenant for a year or from year to year, and that person has such an interest in other agricultural land comprised in the same agricultural unit as that to which the notice relates, the person on whom the notice is served (hereafter referred to as “the claimant”) may within the period of two months beginning with the date of service of the notice to treat, serve on the acquiring authority a counter-notice—

(a) claiming that the other land is not reasonably capable of being farmed, either by itself or in conjunction with other relevant land, as a separate agricultural unit; and

(b) requiring the acquiring authority to purchase his interest in the whole of the other land.

Section 80 of the 1973 Act, as amended, provides the following definitions:

“agriculture”, “agricultural” and “agricultural land” have the meaning given in section 86 of the Agriculture (Scotland) Act 1948, and references to the farming of land include references to the carrying on in relation to the land of any agricultural activities;

“agricultural unit” has the meaning given in section 122 of the Town and Country Planning (Scotland) Act 1997;

Section 86 of the 1948 Act includes the following definition:

In this Act the expression “agricultural land” means land used for agriculture which is so used for the purposes of a trade or business, or which is designated by the Secretary of State for the purposes of this subsection, and includes any land so designated as land which in the opinion of the Secretary of State ought to be brought into use for agriculture:

Provided that no designation under this subsection shall extend—

(a) to land used as pleasure grounds, private gardens or allotment gardens, or

(b) to land kept or preserved mainly or exclusively for the purposes of sport or recreation, except where the Secretary of State is satisfied that its use for agriculture would not be inconsistent with its use for the said purposes and it is so stated in the designation.

Section 122 of the 1997 Act includes the following definition:

“agricultural unit” means land which is occupied as a unit for agricultural purposes, including any dwellinghouse or other building occupied by the same person for the purpose of farming the land;

Authorities

Earl of Seafield v Currie 1980 SLT (Land Ct) 10
Forth Stud Ltd v Assessor for East Lothian 1969 SC 1
Jenners Princes Street Edinburgh Ltd v Howe 1990 SLT (Land Ct) 26
Johnson v North Yorkshire C.C. 65 P.& C.R. 65
McDonald v O’Donnell 2008 SC 189
Whitsbury Farm and Stud Ltd v Hemens [1988] AC 601

Procedural background

[3] A substantial part of the applicant’s property, extending to about one third of the total area, is to be taken by compulsory purchase in connection with the M9/A90/M90 Trunk Road (Balmedie to Tipperty) Compulsory Purchase Order 2012. A general vesting declaration was made by Scottish Ministers on 4 February 2013. The land to be taken runs through the middle of the subjects and the remaining land will be left in two distinct parts.

[4] A counter-notice under sec 49 was lodged on behalf of the applicant on 12 March 2013. The notice made no assertion as to the current use of the subjects but claimed that the remaining subjects were not reasonably capable of being farmed as a separate agricultural unit. It purported to require the respondents, as acquiring authority, to purchase the applicant’s interest in the whole subjects. By letter of 13 May 2013 Transport Scotland on behalf of the respondents rejected the counter-notice on the basis that the applicant’s interest in the subjects did not comprise a valid agricultural unit.

Factual background

[5] The applicant purchased her dwelling house and an adjacent seven acre field in 1994. She intended to use the land for equestrian activities. She built three stables and a barn for storage of horse feed and equipment. The house, stables and manège, or training area, are situated at the north west end of the Seven Acre field. She has always used that field for exercise or grazing of her horses.

[6] In 2000 she acquired adjacent land extending to some 9.53 hectares (approx. 23.5 acres.) This has been fenced as two fields; one running alongside the Seven Acre field and known as the Six Acre field and the other, lying to the south and west of these fields, as Big Hay. When she acquired this land her intention was to derive an income from it from agricultural use to help cover the costs of her equestrian activities. She took practical steps to equip the fields for that purpose. She installed stock-proof gates. She renewed fencing. She cleared drains and took steps to improve natural access to water in Big Hay. She installed a water trough at the junction of the three fields, with a mains water supply, to provide water for the horses and for grazing sheep or cattle. She sowed the Seven Acre field with meadow grasses to provide feed for horses. She sowed the other two fields with rye to provide hay crops.

[7] Since at least 2005 she has established a regular pattern of use of the fields. The Seven Acre field is used by horses only. She uses an electric fence across the field to control their grazing. The horses also use the Six Acre field for six to eight weeks in January and February as it provides better shelter from westerly winds. She has a cross country track with a series of permanent jumps round the entire perimeter of the fields. She can use this when sheep are in the two fields but does not use it in Summer months to avoid interference with the hay crop.

[8] The two fields are let to Mr Bruce on annual short lets for winter grazing by sheep between about September and March. He pays “the going rate of 25p per sheep”. There might be something of the order of 90 sheep at a time. The applicant is not anxious to maximise her income at present because she has a good income from her employment in the oil industry. It was not suggested that 25p was not a realistic commercial rate. Mr Bruce said, in his affidavit, that he knew that the applicant kept an eye on the sheep. It was not suggested that she had any contractual responsibility to do so.

[9] The applicant also manages the fields to provide an annual hay crop. Overall management includes use of fertilisers and weed-killers. She takes active steps to control ragwort. She has to maintain fencing. She pays for the water supply. She arranges for contractors to cut and bale the hay. She gives active physical assistance at baling.

[10] The hay crop could be of the order of 300 large bales per annum and bales can sell for £30. However, her gross income from the two fields from 2001 to 2012 (excluding 2007/8) averaged just over £1000 with considerable variation from year to year - for example, £253 in 2010/11 and £3,602 in the following year. The main variation relates to hay where amounts harvested vary with weather and the going rates also vary considerably from year to year. The income figures were exceeded by a fairly narrow margin by a broadly similar range of expenditure figures. The main variation was said to relate to the inclusion of works of repair or improvement as well as annual costs of fertilisers and the like. However, it was not disputed that agricultural activities on the fields could produce a net annual income of several hundred pounds.

[11] We accepted Ms Emslie as a credible witness. She said that she had in mind that, if necessary, she could derive a larger income from the land which would help support her if she lost her job or if her pension proved inadequate. She described herself as experienced in agriculture being from a farming background. She was comfortable in handling sheep or animals such as pigs. She could make much more intensive use of the land for chickens and pigs. She had not explored markets but she was confident that there were local slaughterhouses which could take her beasts. She would aim to supply local butchers. She said this was a common trade in the locality and that there were many small holdings being farmed.

Submissions

[12] There was some preliminary discussion of the question of viability but Mr Sheldon made it clear that he did not contend that there was a test of viability in relation to the status of an agricultural unit for the purposes of the 1973 Act. There was some reference to authorities dealing with the question of whether use for grazing or keeping horses could be described as agricultural use: in particular reference was made to McDonald v O’Donnell. However, Mr Burnet made it clear that he was not contending that the use by horses was agricultural use.

[13] There was some dispute between the parties as to whether the use for agricultural purposes had to be use by the person making the claim but the main issue was whether the reference to “use” of the land in the first part of sec 49 included reference to potential use. We think the arguments emerge clearly enough from the discussion which follows and it is unnecessary to attempt to summarise the submissions separately. There was no real dispute on issues of primary fact.

Discussion

Applicant’s use

[14] There is no doubt that the use by Mr Bruce is use for agricultural purposes but he does not have a qualifying tenancy. Although it is not necessary for the purposes of the present decision to reach a concluded view as to whether full time use by a tenant would suffice for the purposes of sec 49, if there was no form of active management by the landlord, the submissions touched briefly on that point. We are satisfied that the applicant is entitled to claim as owner and landlord of an agricultural unit even if not, herself, in active occupation for agricultural purposes. For the purposes of the section it is sufficient that the land is used for agricultural purposes by someone. That is consistent with the explicit provision in parenthesis in the second line of the section. Landlords and tenants have distinct but well recognised interests in agricultural land. Both have interests likely to be seriously affected when severance has a significant effect on agricultural activity. The main thrust of the scheme of the section is to protect the interests of the owner. The remedy given is to force the acquiring authority to buy the whole unit. If the interests of the landlord were intended to be excluded we think the provision would have been expressed in such a way as to make this quite explicit.

[15] In any event, we are satisfied that the applicant can properly be said to be using the two fields herself for agricultural purposes. She acquired them to be able to derive an income from them. She equipped them properly for that purpose. She derives an income from the agricultural use of the lands. She may not currently be maximising that income but she is dealing with matters in a commercial fashion. It is clear that she manages the hay. She also has responsibility for the secure fencing of the sheep. She makes arrangements for the annual grazing lets. It might be added that we do not place much weight on the evidence that she assists with the sheep in bad weather. That seems to take place on an informal basis. It was not suggested that she would have any responsibility if she failed to attend properly to them in winter months.

Actual or potential use

[16] The critical issue was whether the operation of sec 49 could be based upon potential use of land. The section can be seen to require assessment of activities at two stages. The first is dealing with the position which is to be changed by the compulsory purchase. It is not surprising that the provisions dealing with that stage are in the present tense. The language is appropriate to direct attention to actual established use. The second stage is dealing with what, at the time of the counter notice, might be expected to be a hypothetical situation. It is looking at the position after the land has been taken. The reference to potential use which is implicit in the expression “reasonably capable of being farmed” is readily explained by that context. It relates to the potential use after the character of the unit has been changed.

[17] Mr Burnet placed considerable reliance on the term “reasonably capable of being farmed”. That term had been discussed in Johnson v North Yorkshire C.C. He also referred to the approach taken in Earl of Seafield v Currie and Jenners Princes Street Edinburgh Ltd v Howe.

[18] However, we are satisfied that, in broad terms at least, the first stage requires assessment of the use actually being made of the land at the time of the general vesting declaration. We need not attempt to define this more closely. There may be scope for some reference to use planned in the short term and for present purposes it was not necessary to identify any particular date as critical to the time of assessment. It is sufficient to say that the term “reasonably capable of being farmed” is not expressly applied to the first stage and we see no justification for treating it as an implicit part of the first stage test. “Agricultural land” is defined for the purposes of sec 49 of the 1973 Act by reference to sec 86 of the 1948 Act. It means “land used for agriculture”. We consider that, whatever the precise scope of the use of the present tense, it is tolerably clear that the Act does not contemplate, at the first stage, an inquiry as to potential use of the land.

[19] The case of Johnson dealt only with the second stage. The Earl of Seafield and the Jenners cases both related to the provisions of the Agricultural (Holdings) legislation dealing with the potential of a holding to support a new tenant on succession. This context is quite different from the present. But in any event, in both cases the Court required to consider a statutory test expressed in terms of capacity: sec 18(2) of the 1968 Act and schedule 9 of the 1949 Act, provisions fully set out in the reports. A test of capacity plainly requires consideration of potential use.

[20] Putting the matter in practical terms, we readily accept that where an area of land such as the Seven Acre field is being used for horses, it might readily be converted to use for livestock. There might be no need for any physical alteration to allow a change from grazing horses to grazing cattle or sheep. But we do not accept that this potential would allow the land to be described as “used for agriculture”. It is not used for agriculture it is used for equestrian activities.

[21] We heard nothing to suggest that the use of the house itself had any significant connection with the farming of the two fields. There was nothing upon which to base any finding that the proximity of the house to the two fields had any bearing on the way these fields have been worked.

Use by way of trade or business

[22] Although the affidavit from Ms Leslie suggested that the Valuation Office had approached the provisions of sec 49 on an assumption that there was some requirement of overall “viability”, the respondents expressly conceded that there was no such requirement at the first stage. It was not necessary to consider the second stage and we need do no more than express a doubt as to whether any different test could be appropriate there. We do not need to comment on the sense in which it appears to have been used in the course of the Compulsory Purchase proceedings although there was some reference to this. Ms Leslie’s affidavit made reference to the provisions of schedule 2 of the Agricultural Holding (Scotland) Act 1991 as amended. However, these provisions relate to succession. The issue of viability in the sense of a unit which could provide a livelihood for an occupier might well be relevant in that context – and indeed the history of the provisions, discussed in Seafield and Jenners cases, makes that relevance clear. However, it does not have any apparent relevance in the present context.

[23] A test in terms of the economics of the operation is implicit in the references to use for the purposes of a business but it is not necessary that a business should always produce a profit. We think it sufficient that it can be demonstrated that an applicant’s use of the land in question is a commercial activity; that it involves agricultural use with a view to profit. While it may be that there are activities where the expected levels of return are so low that it would not be accurate to refer to the enterprise as a trade or business we are satisfied that this case does not quite fall into that category. Although the applicant avers that she does not keep accounts for her farming interests “as it only involves hundreds of pounds”, she does use the fields to produce a commercial return which is reasonable in all the circumstances. We are satisfied that the two fields can properly be said to be used by her for agriculture for business purposes. They can be described as a unit worth working.

[24] On the other hand, it is clear that there is no question of the equestrian activities being by way of trade or business. The current use of the Seven Acre field is not for agricultural purposes. The applicant’s interest in horses is by way of hobby or recreation.

[25] As we have said, there was no evidence that the house itself was used in any way connected with the farming of the two fields. The evidence would not support any finding that the house was occupied for the purpose of farming the land. For completeness it may be added that although it can probably be assumed that the applicant used the house to prepare invoices in relation to the sheep and hay, the level of any paper work carried out in the house in connection with the agricultural use of the two fields can properly be disregarded as insignificant in this case.

The relevant unit

[26] The notice and the application to the Tribunal dealt with the subjects as a whole. We require to deal with the validity of that notice. A finding that part of the subjects might be regarded as an agricultural unit would serve no useful purpose. A conclusion that the two fields were used for agriculture for the purposes of a trade or business would not suffice.

[27] As we have seen, Mr Burnet contended that the agricultural potential of the land was sufficient. He referred to Ms Emslie’s evidence of her fall- back position. If she needed more income she could use the whole land for agricultural purposes and use it more intensively. We accept that all the fields could easily be used in that way. However, we have rejected the proposition that the first stage allows assessment of potential as opposed to actual use.

[28] We are satisfied that the house and the Seven Acre field with the manėge and stables cannot be said to have been, or to be, used for agricultural purposes. As Mr Burnet relied on the potential use of the subjects, he did not have to consider other bases upon which it might be said that the subjects as a whole were being used for agricultural purposes. However, for completeness we look briefly at possible lines of argument. We think that any such argument would require examination of whether there could be any justification for regarding the agricultural use of the two fields as sufficient to impart an agricultural character to the rest.

[29] The present subjects are a unit in the sense that they are all in the ownership of the applicant. But that is not a factor which has any bearing on assessment of their agricultural characteristics. They can also be viewed as a unit because of their physical contiguity and the fact that they can be encompassed by one boundary. We do not think that they could be said to be a single unit in any other practical sense.

[30] We recognise that the house might be viewed as part of a unit with the equestrian facilities. We have no doubt that this is a marketable type of unit and that the combination of house and such related leisure activity would be a potential selling point. The proximity of house and stables is obviously highly convenient for the necessary supervision of horses. This was a major factor in the applicant’s acquisition of the house in the first place. In can also be said that we recognise the possibility that the whole subjects could be used as a small-holding for intensive agricultural use. This might require housing as an essential part of the operation. Had we accepted the argument that the first stage use had to be assessed by reference to potential use, we would have had no great difficulty accepting that the land might possibly be used in such a way as to require use of an adjacent dwelling. Some farming activities would not be worth undertaking without convenient accommodation to facilitate supervision and easy working.

[31] Where subjects can sensibly be viewed as a single unit, a dominant use for agricultural purposes might possibly suffice to colour the whole subjects even if certain parts were used for other quite distinct purposes. In other words, there might be circumstances where the character of one part of a unit so dominated that other uses could be ignored. But, whatever potential such argument might have, we are satisfied that it was not one open in the circumstances of the present case. In terms of use, the present agricultural use is, if anything, subordinate to equestrian activity rather than the reverse. In terms of size, it is the case that the area occupied for agriculture is significantly larger than the remainder but the latter is far from insignificant.

[32] We did not hear submissions on the implications of the aspect of the definition of “agricultural unit” relating to the inclusion of a dwelling house. No evidence was led that this house was to any extent used for agricultural purposes, far less that it could properly be said to be occupied for that reason. The house has no obvious connection with the activities carried out in the two fields. It plainly was acquired for residential purposes. There was no suggestion of any identifiable change in the nature of occupation of the house following acquisition of the two fields.

Conclusion

[33] Although we are persuaded that the two fields might be regarded as agricultural land and would fall to be regarded as being within the same unit as the land to be taken under the notice to treat, we are not satisfied that the whole subjects described in the counter notice can properly be described as agricultural land or as forming part of such an agricultural unit. We accordingly find the respondents’ challenge to the validity of the counter-notice to be well founded.

[34] The question of looking at parts of the supposed unit was raised by the Tribunal in course of Mr Sheldon’s submissions. We understood him to say that if we did base our findings on separate characteristics of parts of the unit, it might be helpful if the case was put out by order before a final order. It is not clear to us that this will serve any purpose but we invite any relevant submissions from parties.

[35] We were not asked to deal with expenses and if parties agree, these can be dealt with on the basis of written submissions.


Certified a true copy of the statement of reasons for the Opinion of the Lands Tribunal for Scotland intimated to parties on 16 January 2014

Neil M Tainsh – Clerk to the Tribunal