OPINION

Elizabeth McNab v Alexander Smith
(Compensation)

Introduction and Summary

[1] In this application for discharge of a servitude right of access, the Tribunal, after hearing evidence and submissions on the merits and inspecting the locus, issued an Opinion dated 15 June 2012. We decided to grant the application on the basis that the resultant loss or disadvantage to the respondent could be met by an appropriate award of compensation. At that earlier hearing, by agreement, evidence had also been led in relation to the respondent’s claim of compensation, but submissions (if required) on that matter were postponed to a later date. The Tribunal have now received both written and oral submissions which, in the case of the respondent, were based on a further expert report and, in the case of the applicant, had the benefit of some updating and addition of figures by her expert witness.

[2] Our earlier Opinion is referred to. In summary, we recognised that the access right in question was of substantial benefit to the respondent, at least in respect of gate ‘C’, the lower of the two gates by which the respondent took access for his dairy cows into the field in question in the exercise of the servitude right. On consideration, however, of the factors listed in Section 100 of the Act, we were satisfied that it would be reasonable to grant the application. Although there was evidence, which was not in dispute, to the effect that discharge of the servitude would not have any effect on the value of the respondent’s property, the applicant accepted that it would cause some disadvantage to the respondent as owner of the benefited property. We indicated that compensation related to the estimated costs of certain improvement works at the respondent’s property might be appropriate. The applicant did not oppose an award of compensation, but parties were far apart on the amount thereof, with the respondent contending for £105,473 and the applicant for a sum in the region of £15,000.

[3] To allow for the possibility that the applicant might, upon learning the Tribunal’s decision on the amount of compensation, decide not to proceed with the claim for full discharge but might instead seek partial discharge (in effect, removing the respondent’s right of access by Gate ‘D’ but not that by Gate ‘C’), the Tribunal also heard submissions on that alternative basis. In that case, the respondent apparently sought £31,000 (plus, we think, some of the minor items of expenses included in the full claim), but the applicant contended for no award.

[4] The Tribunal have decided to award, on the basis of full discharge of the access right, compensation of £23,380; but if the applicant were instead to seek only partial discharge, no award would be appropriate.

Statutory Provision

[5] Section 90 of the Act provides inter alia:-

“90(6) … an order discharging or varying a title condition may –

… direct the applicant …

to pay to any person who in relation to the title condition was an owner of the benefited property … such sum as the Lands Tribunal may think it just to award under one, but not both, of the heads mentioned in subsection (7) below.

“(7) The heads are –

(a) a sum to compensate for any substantial loss or disadvantage suffered by …

(i) the owner, as owner of the benefited property;

in consequence of the discharge or variation.”

Authorities referred to:

None

Respondent’s Submissions

[6] The respondents’ claim was as follows:-

New access
Concrete access roadway, ‘A’ to ‘D’ £76,513
Improvements at gates ‘A’ ,’B’ 8,820
Removal/replacement of gate ‘A’ 300
Draining improvements 3,300
Fencing, etc 5,704
£94,367
Other expenses
Legal fees – amendment of standard security £3,000
CKD Galbraith’s fee – report on costs £1,440
Savills fee – report on substantial loss and disadvantage £4,530.24
Savills fee – attendance at hearing £1,866.44
Total £105,473.68

[7] In a written submission, Ms McLaughlin argued that in the circumstances, where the applicant continued to enjoy a servitude right of access over the part of the road owned by the respondent, a just award should involve the cost of construction of a new access route allowing cattle to be moved to and from the cow shed without the applicant driving through the herd, to remove the ongoing difficulties that could result from further sheriff court litigation. The cost of the new road was detailed in the new report by CKD Galbraith. The new access route and other improvements should not be viewed as betterment. The compensation would provide an access route for the same purpose as the servitude right of access along the whole of the upper part of the private road, solely for the use of the respondent in his capacity as a dairy farmer. The type of road proposed would require minimum maintenance and thus mitigate the respondent’s loss and disadvantage, and would be a viable alternative for the use of the dairy herd, minimising any health problems from gates being used at the lower part of the field. It would result in the loss of grazing land. The terms of the standard security over the applicant’s land would require to be modified. It was just that the respondent be compensated for the expense of employing CKD Galbraith who had provided necessary advice on costs and materials. It was also appropriate that the cost of the separate exercise by Savills of reporting on the losses and disadvantages that would result from any discharge or variation, and their attendance at the first hearing to give oral evidence on that, should be awarded.

[8] In oral submission, Ms McLaughlin said it was significant that the applicant would still have the right to take access over the respondent’s part of the road. There was reason to think that the ongoing sheriff court dispute would continue if the alternative road did not go down to gate ‘A’. That would reduce the scope for conflict. The applicant knew that she would have to co-exist with the respondent. This was an effective alternative access from ‘A’. The respondent could not afford to continue using this dairy farm if there were ongoing disputes. There had been evidence of the respondent’s need to use Gate ‘D’. The proposed road would give the same effective right of access as the respondent had at present. The expense of amendment of the standard security was necessary on a ‘belt and braces’ approach. The claims for fees were by analogy with compulsory purchase compensation claims.

[9] Responding to the applicant’s alternative position, Ms McLaughlin added that a woodchip road would not be suitable. The concrete road was not of a higher standard, the present road having the same functionality. The road should be 4 metres wide to allow for the verge area around. The new road would not be required if the respondent could continue to use the access that had been working well. There might be occasions when it was necessary to go further up the road than ‘C’. The respondent was entitled to a road of the standard at the time when the servitude was created. A reasonable person would take the view that adequate compensation was required to enable the parties to live together. There was no evidence to suggest that the respondent would not carry out these works. The different figures between Savills and CKD Galbraith were accounted for by different contractors, a larger element of hard-standing and increased width. In answer to a question by the Assessor as to the need for 200mm concrete for cows, on top of 300mm plus ‘blinding’, Ms McLaughlin said that was the contractors’ opinion. The respondent’s part of the existing road was 500mm deep. The new road, particularly the lower part, would need to ‘bed in’.

[10] In relation to the possibility of partial discharge, Ms McLaughlin referred to the cost of new road from ‘C’ to ‘D’, i.e. £31,000.

Applicant’s Submission

[11] The applicant’s submission for an award in the region of £15,000 was based on a deduction of £6,000 from a costs figure of around £21,600 for appropriate works, broadly in line with the indication in the Tribunal’s earlier opinion and supplied by Mr Leggate on the basis of the SAC Farm Management Handbook, as follows:-

Gate ‘A’ concrete hard standing £9,100
Gate ‘B’ concrete hard standing £2,240
Woodchip road, ‘B’ to ‘C’ £4,500
Hard core entrance area to road £500
Fencing of woodchip track £1,260
Larger gate (‘A’) £100
Fencing to direct cows up field £600
Drainage from gate ‘A’ £1,650
Drainage from gate ‘B’ £1,650
Total £21,600

[12] In a written submission, Ms Slee indicated that these costs were based on the advice of the Assessor recorded at Para [44] of the Tribunal’s Opinion. The compensation would be for any substantial loss or disadvantage suffered as a result of no longer having use of the stretch of road from ‘B’ to ‘C’. There was in this case no loss, but it was accepted that there may be some disadvantage to the respondent as works may be required to improve the gateways, the reasonable cost of which the applicant had always been willing to meet. The disadvantage had to be ‘substantial’, but the applicant was willing to compensate by way of a figure based on the costs of the works considered by the Assessor to be necessary. A just award would take into account a range of factors. There would be betterment, in that the proposed works would improve the accesses at ‘A’ and ‘B’ beyond their previous condition and that of other gates on the farm. It was not unreasonable that the respondent should have sole responsibility for the maintenance of any new track, with the applicant having sole responsibility for maintenance of her track. Any replacement track would require little maintenance, at least initially. The area of ground lost would be minimal and the Assessor and both agricultural experts at the previous hearing had considered that the grazing land was not maximised. As to consequential legal expenses in relation to the standard security, it was doubted whether anything more than notification was required, and as the Tribunal’s Order would in any event require to be notified, there was no loss or significant disadvantage there. Further, although compensation may in this case be payable despite there being no capital loss, it was relevant to consider the capital value as a cross-check. The works proposed would be unlikely to enhance the value of the land to a purchaser. This was a separate aspect from betterment: land could be improved without adding to its value. Taking all these factors into account, it would not be reasonable for the applicant alone to meet the cost of the identified improvement works. Although it was accepted that the respondent was entitled to make use of his land as he wished and dairy farming was a reasonable use, the statutory tests required objectivity. The applicant did not propose any compensation for the legal costs or for the loss of land.

[13] It was further submitted that the respondent’s claim was wholly excessive and unreasonable:-

1. No justification was provided for a concrete road from ‘A’ to ‘D’, contrary to the improvements proposed in Para [44] and the evidence at the earlier hearing.

2. The CKD Galbraith report was untested new evidence, without any explanation for departure from the Savills report: if the Tribunal were to have regard to that, the applicant would wish to consider leading further evidence.

3. There was no basis for a track from ‘A’ to ‘B’ on a consideration of the separate proceedings. The respondent had not prior to intimating his claim proposed any discussion of an agreement on that basis.

4. Nor was the basis for seeking a track from ‘C’ to ‘D’ clear, it having been conceded at the hearing that it was very difficult to oppose variation to remove access beyond ‘C’.

5. It could not be reasonable to require the applicant to pay over £100,000 where a new track would be of no use to any future purchaser.

6. The figure proposed was considerably higher than the value of the whole field, even on Mr Struthers’ figures.

7. The respondent was not seeking an award for loss of grazing land.

8. The suggested award for legal fees was inflated.

9. It was not appropriate to include the cost of expert reports and attendance at the hearing in this claim: this was a matter to be dealt with as part of the expenses of the application. It was also not clear why an additional report was commissioned.

10. The applicant had earlier indicated her willingness to pay compensation.

11. The works proposed by the Assessor had been understood to amount to a viable surface for cattle, there being evidence on this also from Mr Leggate and Mr Allan.

12. There was a basis for the figure of around £15,000. The costs for resurfacing the gateways were broadly the same, with Mr Leggate’s the highest. The figures for drainage were the same and the rates for fencing similar. The divergence related to the track, with neither of the respondent’s quotes addressing the track suggested by the Assessor. It would therefore be reasonable to use Mr Leggate’s figures.

[14] Supplementing these submissions orally, Ms Slee submitted that Mr Leggate’s costing was fairly generous for the works proposed. The award had to be such amount as was just. There was no way of guaranteeing that the respondent would suffer any loss, the issue rather being as to the extent of the disadvantage to be suffered as a result of the discharge or variation. The respondent was addressing wider considerations between these neighbours between whom there had been friction. A road from ‘B’ to ‘C’ would enable the respondent to get to where he could presently get to. There had been no real argument for keeping the road beyond ‘C’: there might be some advantage in that, but the disadvantage of losing it was not substantial. As to the road from ‘A’ to ‘B’, there was no reason why both gates ‘A’ and ‘B’ couldn’t be used. The width of the road need not be ‘like for like’, the bottomed part of the track anyway being around 3.2 metres wide. A concrete road was not necessary and would be ‘betterment’. In any event, the quotes were far in excess of what would be required. There was no evidence why a civil engineering solution was required. If a concrete road were required, a figure (for ‘B’ to ‘C’) of £18,000 (£100 per metre) would be more in line with Mr Struthers’ evidence (£120). Ms Slee did not see why an agricultural lender would require variation of the standard security. The field was worth about one third of the amount claimed.

Tribunal’s Consideration

[15] We are in no doubt at all that discharge of this servitude will cause a substantial disadvantage to the respondent as owner of West Hills Farm and that it is just to make an award of compensation under Section 90(7)(a) of the Act. The applicant indeed accepts this and appears to have been willing throughout to make at least some payment in compensation. It was not disputed that a purchaser of this farm land might in fact not use it for dairy and so not ascribe any substantial value to this servitude right. That might appear to affect the position on an objective approach, but we think that the applicant’s acceptance of the basic position is correct. The benefited property is an established dairy farm with no indication that that position will change. The discharge will be to the disadvantage of the respondent as owner with the result that he will require to incur expenditure if he wishes to make up for the loss of access from the applicant’s stretch of the farm road. We recognise the possibility that the respondent, being free to carry out as much or as little work as he chooses, may not necessarily incur all the cost which we consider would be required, but he will still have suffered the disadvantage.

[16] Procedurally, parties were slightly at odds in this hearing. Despite the agreement to lead evidence which bore on the compensation issue at the earlier hearing, the respondent introduced new evidence in the form of an expert report from a different expert form the one who previously reported and gave evidence, resulting in a considerably higher claim. The applicant on the other hand based her submission on an estimate of the cost of works which our Assessor had indicated would be appropriate, on a scale – the S.A.C. farm management handbook – to which we had referred when giving some guidance on the issue of compensation with a view to avoiding the need for further expense. Parties’ agreement last time on procedure apparently did not include agreement that no further evidence should be led. Further, we made clear that while we had, of necessity in reaching our decision on the merits, formed at least some provisional views on the need for improvement works if the servitude was discharged, we had formed no concluded views on compensation as we had not heard final submissions. Accordingly, it was open to the respondent not only to argue the case for works going beyond what the Assessor had envisaged but to introduce fresh evidence, although we admit to considerable surprise that the respondent incurred a further report essentially on same matters which Mr Struthers had, to our mind, covered in his report and oral evidence. We would have considered allowing the applicant to lodge further evidence if we thought she was disadvantaged as a result.

[17] In the event, we have attached little weight to Mr Wedgwood’s opinions. He was not called to give evidence, leaving us unclear as to the basis on which he considered this matter. We note his reference to “compensation for the full servitude right from points A to D” and also his instructions, which were also produced to us, to “provide costings for (a) a road that is similar to that described by the Tribunal in the Opinion and (b) a road that would be of sufficient quality to be acceptable to our client.” He did not apparently provide (a) and we cannot regard (b), untested, as a satisfactory basis. We noted that for the same length of road, from ‘B’ to ‘D’, Mr Wedgwood provided a costing of £58,695, apparently a civilly engineered load-bearing road. This compared to Mr Struthers’ figure, which had been explained, of £31,200. We could not accept Mr Wedgwood’s rates.

[18] The Assessor, having heard the submissions, has not altered or added to his views. However, we accept that there were legitimate issues on the nature and length of the road and on some minor details. The respondent seeks a concrete road, presumably with hardcore base, and this was Mr Struther’s opinion as well as that of Mr Wedgwood. It is fair also to note that ‘Option 2’ identified by the two experts in 2009 involved a concrete road, albeit the cost rate at that time was stated considerably lower than Mr Struther’s figure (apparently, £84 per metre compared to £120). That was in the context of the attempt to resolve all issues between the parties. We have considered concrete as against the Assessor’s advice that, taken along with the other improvements suggested, a fenced track, with a porous membrane and finished with woodchip, would compensate for the loss of gate ‘C’. Concrete would reduce the maintenance requirement, but the existing track (at least the respondent’s stretch of it, which is more representative of the type of track contemplated under the servitude right) requires maintenance and of course the respondent will be relieved of any maintenance obligation in respect of the applicant’s section of the track. There was reference to betterment being offset against this maintenance obligation, but we consider that the difference between the costs (around £40 per metre compared to over £100) would considerably over-compensate. We had the feeling that Mr Struthers was perhaps coming from experience of compulsory compensation agreements, which in practice might sometimes fall on the generous side in the case of accommodation works. Remembering the anticipated effect of the new hard standings around the gates and the improved drainage, and also looking at the way in which the respondent currently uses the field, in accordance with reasonable agricultural practice, we consider that provision for a concrete road would be excessive and provision of the woodchip surface reasonable. Ms Slee’s general point about the relationship between the value of the field and the amount claimed also seems relevant here.

[19] There was an element of uncertainty at the hearing as to whether Mr Leggate had included for all aspects of the provision of the track. Our tabulation below shows that we have in fact taken a rather higher cost rate than Mr Leggate - £30 for hardcore plus say £9 for woodchip, i.e. £39 per metre, plus an allowance for the cost of membrane and stripping the top soil, as opposed to Mr Leggate’s £25 plus an allowance for hard core at the entrance area.

[20] We can find no justification for Mr Wedgwood’s proposed width of 4 metres, 3 metres being in our view adequate. We accept Ms Slee’s submission that reasonable substitution for access for this agricultural purpose of moving cows does not necessarily involve the same width as a track over which vehicles also pass.

[21] On the length of the road, we find ourselves unable to accept either ‘A’ to ‘B’ or ‘C’ to ‘D’. On the former, we accept Ms Slee’s submission that the possibility of continuing unresolved conflict leading to problems on the respondent’s section of the road, over which the applicant has the servitude right, is not relevant here as this would not be referable to the servitude with which we are concerned or its discharge. One might well have hoped that the parties would have included this in a sensible agreement along the lines of ‘Option 2’ recommended by the two experts in 2009 (or indeed that they might still do so), but we cannot, in assessing compensation under the statute, go outside the consequences of our order. In any event, the respondent will presumably still be using his stretch of the road when using gate ‘B’. We did consider whether a roadway leading up from ‘A’ would be reasonable in making up for the loss of gate ‘C’, i.e. whether, in view of the ‘poaching’ problem around gate ‘A’ in the lower part of the field, there should be a track there also, but took the view that the other measures in that area, the hard standings at gates ‘A’ and ‘B’ and the drainage improvements, would be sufficient. Poaching problems will occur anyway, but proper drainage around ‘A’ and ‘B’ should in our view make a considerable difference and, along with the improvements around the gates (not in dispute, with Mr Leggate’s figures in fact exceeding those claimed by the respondent) reasonably make up for the increase in the problem resulting from the inability to use ‘gate ‘C’.

[22] We also do not consider a road or track from ‘C’ to ‘D’ to be reasonably required. We refer to our earlier Opinion in relation to use of gate ‘D’.

[23] In relation to the cost of improvements at gates ‘A’ and ‘B’, Mr Leggate’s figures were somewhat higher than the respondent’s claim of £8,820, but that figure may have reflected the provision of a concrete road running from gate ‘A’. Using our best judgment on the information available, we have allowed £10,000 for this item. Parties had the same figures for the drainage improvements (which did seem to us important having regard in particular to the slope down into the corner where gate ‘A’ is situated).

[24] We prefer Mr Leggate’s rate for fencing of £7 per metre, the S.A.C. rate for netting fence, compared to, apparently, a somewhat higher figure which we were in fact not able to deduce from the submission to us. Mr Leggate added a provision of £600 for 200 metres of single wire fence to direct the cows up the field, but there was evidence that the respondent sometimes uses electric fencing already and we do not see the need to add this item.

[25] We have accepted the respondent’s figure of £300 for the new gate ‘A’.

[26] To the resultant figure of £22,880 for the cost of improvement works, we would add only one item, viz. £500 legal expenses in relation to the standard security. We have a degree of doubt about this, as we cannot recall any similar claim by a benefited proprietor, although many presumably have mortgages. Discharge of real burdens might perhaps be different in relation to this, but we quite often exercise this jurisdiction in relation to servitudes. We note that there is no effect on value and have not been able to understand how the standard security might be amended. The applicant appeared, however, prepared to accept £500 in relation to obligatory notification to the lender, and we shall give the benefit of the doubt to the respondent. We accept Ms Slee’s submission that the other three items claimed, in relation to Messrs Savills’ and Galbraiths’ fees in relation to expert evidence, are properly seen, under our jurisdiction, as judicial expenses (which may or may not be recoverable).

[27] The remaining issue is whether to make the deduction contended for by the applicant, or any deduction, from £23,380.

[28] We cannot accept the argument of betterment as put. No doubt, the works will improve the position at and around gates ‘A’ and ‘B’ and compare favourably with other gates on the farm. That, however, misses the point that the works are required to compensate for the loss of gate ‘C’. The works are not to improve the field, but rather to provide, in the particular circumstances of this case, a reasonable equivalent. Not to award the amount of these costs would result in the respondent getting less than a reasonable equivalent. The applicant accepts that the improvements will not add capital value.

[29] Ms Slee also proposed consideration of the capital value position as a ‘cross-check’, arguing that not only was there no capital loss but the improvements would not enhance the value to any purchaser of the land and account must be taken of each of these things in deciding what is just and reasonable. This was said to reflect the requisite objective approach. However, on the applicant’s own approach, this is not a matter of loss occasioned by the discharge but of just compensation for the disadvantage to be suffered as a result of it. The discharge was sought by the applicant. Having, like the applicant, accepted that compensation is appropriate even although there is no effect on capital value, we do not consider that the capital value position justifies a reduction to less than the resultant cost to the respondent. We have in mind the position had the parties dealt with the matter on an amicable agreed basis – surely the approach to lift the servitude would be considered on the basis of reimbursing all of the reasonable cost to the benefited proprietor of making up for the effect on him, at least where the works would not increase value? If the cost properly arrived at appeared to the burdened proprietor excessive, that would suggest abandonment of the plan, not reduction of the payment to the neighbour.

[30] These things said, we have considered the position on the basis of a ‘stand back and look’. However, having looked closely at the respondent’s claim and in several respects cut it back, we think that the resulting figure of £22,880 for the various improvements, plus the item of £500, represents a fair and reasonable measure of the disadvantage to be suffered. We have therefore awarded £23,380 on the basis of full discharge, as shown in the table below.

[31] If the applicant were to revert to the alternative of partial discharge, i.e. leaving access as far as gate ‘C’, we would make no award. We refer to the discussion in our earlier Opinion of the usefulness to the respondent of gate ‘D’. The respondent would, to all intents and purposes, have the same access provision as at present. There might be issues as to the arrangements, on a more permanent basis, for exercise of the right, but if that is relevant at all, loss of gate ‘D’ would not, as we understand it, add anything to the problem. If the expense of notification to the respondent’s lender still arose – as to which we have even more doubt – this on its own could not meet the requirement of ‘substantial’.

Decision

[32] Our award of £23,380 is made up as follows:-

Improvements
Improvements to ground around gates ‘A’, ‘B’ £10,000
Drainage at gates ‘A’, ‘B’ 3,300
Removal/replacement of gate ‘A’ 300
Alternative track, ‘B’ – ‘C’ (180m) 8,020
Fencing (180m) 1,260
£22,880
Legal expense: Standard Security 500
Total £23,380

[33] In accordance with Section 90(9), the applicant’s consent is required before the Tribunal can make its Order discharging the title condition and direct payment of compensation. Reference is also made to Rule 6(2) of the Lands Tribunal for Scotland Rules 2003 in relation to the need for payment of compensation to be made before a final, appropriately docketed version of the Order confirming payment, can be issued.

[34] In the event of any issue arising in relation to expenses, the tribunal can dispose of that matter on the basis of written submissions in accordance with our normal practice.


Certified a true copy of the statement of reasons for the decision of the Lands Tribunal for Scotland intimated to parties on 7 December 2012

Neil M Tainsh – Clerk to the Tribunal