OPINION

Elizabeth McNab v Alexander Smith
(Expenses)

Introduction and Summary

[1] In this application for discharge of a servitude right of access, the Tribunal, after a hearing on the merits, 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; and subsequently, after a hearing on the amount of compensation, made an award under Section 90(6) and (7)(a) of the Title Conditions (Scotland) Act 2003 (“the 2003 Act”) of £22,200 in favour of the respondent. There are now competing applications in relation to expenses, the applicant seeking the expenses of the whole process and the respondent asking the Tribunal to make no award of expenses due to or by either party in relation to the merits and to award expenses in favour of the respondent in relation to compensation. Questions of certification of expert witnesses are also raised. These expenses issues are being decided on the basis of parties’ written submissions.

[2] In summary, the Tribunal has decided:-

(i) We find no expenses due to or by either party;

(ii) Messrs Leggate, Allen and Struthers would each be certified as expert witnesses.

The Circumstances

[3] Reference can be made to the Tribunal’s opinions dated 15 June 2012 (merits) and 7 December 2012(compensation) for the full factual position and the Tribunal’s findings.

[4] The circumstances can be outlined as follows. The dispute related to a servitude right of access in favour of the respondent for agricultural purposes, in practice to walk dairy cows during the summer grazing season into a field using one of two gates off a section of farm track which is owned by the applicant and is her only access to her house, a converted farmhouse. Two other gates into the field are available to the respondent but are subject to a degree of ‘poaching’. The application to the Tribunal was lodged in August 2011. The parties had before then been in dispute in relation to the exercise of this right of access for several years. There had been ongoing conflict and also sheriff court proceedings. The application to the Tribunal was on the basis that there was a valid servitude right of access for agricultural purposes in favour of the respondent but the applicant sought discharge, indicating that she had made various offers and that she would be prepared to pay reasonable compensation if that was deemed appropriate by the Tribunal. The respondent opposed discharge. He placed reliance at the hearing on an arrangement which had been in place since about 2009, involving some restriction of the hours in which the right could be exercised and giving notice of its exercise each time by telephone, and argued that that was a satisfactory basis on which he could continue to exercise the right.

[5] Some 6 days before the hearing on the merits, the applicant offered to pay compensation of £25,000 in exchange for a discharge, on the basis of ‘no expenses to or by’. This offer (as well as an alternative involving in effect buying out the whole area in question) was refused.

[6] The hearing on the merits proceeded. Parties had agreed that evidence on compensation could be led at the hearing on the merits but that submissions, if required, on compensation should be postponed to a later hearing. In reaching its decision on the merits, the Tribunal had to consider the possibility of improvement works (at the other access gates and in the field in question) which might compensate for loss of this access right. In its opinion on the merits, the Tribunal, while not deciding on compensation, expressed its view on the extent of such works which might reasonably be required. We also said that it was clear that the servitude had only started to create problems for the applicant when she and her family started tarmaccing the road and replacing the grass verges with set cobbles, in effect making it no longer possible for a car to pass through the herd. However, we made clear that we were in no position to adjudicate about the respective parties’ conduct during the prolonged periods of conflict.

[7] Parties also failed to agree on the amount of compensation. Before the hearing on compensation, the applicant made a fresh offer, this time of either £15,000 on the basis that the matter of expenses would be left to the Tribunal, or alternatively nil on the basis that the applicant would not seek an award of expenses. At that hearing, the applicant argued for a figure around £15,000 and the respondent quantified his claim at around £105,000. As indicated, the Tribunal awarded £22,200.

Submissions

[8] The applicant claims to have tried for years to reach an agreed settlement. In particular, she says that she agreed in 2009 to adopt either course of action set out in a Joint Report by the two agricultural experts advising the parties, claiming that she had understood that both parties had agreed to be bound by that report’s conclusions. The respondent had refused to accept either proposal or to consider any alternative to his retaining the right of access. The applicant also refers to the offer made before the merits hearing. She succeeded on the merits and her offers exceeded the compensation ordered by the Tribunal. On the basis of her success on the merits and on compensation (comparing her offer of £25,000 with the award made) she should be awarded full expenses.

[9] The main thrust of the respondent’s position is that he was entitled to take all lawful steps to defend this right. The applicant had persistently subjected the respondent to significant expense in defending his right. With the 2009 arrangement operating satisfactorily, he had good reason to believe there were reasonable prospects of successfully defending the application. It was only with the benefit of hindsight that it could be said that less expense would have been incurred had he agreed a compensation figure at the outset. It was reasonable that he should be given the opportunity to attempt to retain his right of access for agricultural purposes. If he had accepted any of the proposals made, the compensation payment would have been far short of that required to construct an alternative road. Further, the Tribunal’s award of compensation was 55% higher than the applicant’s offer prior to that hearing. It was reasonable to award him the expenses of the compensation hearing in order that he was adequately compensated for the discharge and to provide sufficient funds to construct an alternative right of access.

[10] In reply, the applicant submitted that the existence of the other legal proceedings was not a relevant consideration. Nor was the applicant’s belief about his prospects. The validity of the right was also not relevant, the Tribunal having express jurisdiction to vary or discharge it. Reference was made to Section 103 of the Act. Although the applicant’s subsequent offer was lower than the award, the respondent, having sought an award of £105,000, had not been successful. The applicant’s arguments had been based on the Tribunal’s indication of the works which would reasonably be required and their figures had been broadly accepted although their further argument on betterment had been rejected. Having offered £15,000 and received no response, and then seen the respondent’s formal claim for £105,000, the applicant had been clear that further negotiation was fruitless and if £25,000 had been offered again it was clear that it would have been rejected.

Tribunal’s Consideration

[11] This is a sorry tale of conflict and very considerable legal expense.

[12] We are not concerned here at all with the expenses of the court proceedings, only with the expenses of this process before the Tribunal. We are in no position to judge, nor would it be appropriate for us to do so, who was right and who was wrong either in the court proceedings, which necessarily concerned different legal issues, or in relation to parties’ conduct during the years of conflict. We are only concerned with expenses arising out of the subject matter of these proceedings, viz. the applicant’s proposal for discharge of the servitude.

[13] Section 103(1) of the 2003 Act provides as follows:-

“103 – (1) The Lands Tribunal may, in determining an application made under this Part of this Act, make such order as to expenses as they think fit but shall have regard, in particular, to the extent to which the application, or any opposition to the application, is successful.”

Prior to the 2003 Act, the Tribunal’s practice was generally to recognise that the benefited proprietor was defending his legal entitlement and even if unsuccessful should not, unless his position was in some way unreasonable, have expenses awarded against him. Section 103(1) required the Tribunal to change its practice and follow the normal rule in court proceedings that ‘expenses follow success’, subject to a discretion to modify the position. The approach which the Tribunal has followed in applying Section 103(1), including its reasons for rejecting the view that the previous approach could continue to be followed, was set out in more detail in West Coast Property Developments Limited v Lawrence Clark and Others (Expenses) LTS/TC/2005/21, 6.10.2006. It is understandable for a proprietor in the position of the respondent here to think that he is in the right in seeking to uphold this undoubtedly valid legal right. However, the subject matter of these proceedings was not the validity of the right but the reasonableness of the application to discharge it. We are therefore no longer able to take as our starting point in relation to expenses the fact that the unsuccessful respondent started with a legal entitlement which he reasonably wished to retain. The starting point has to be the extent to which the applicant, or the respondent, has been successful. Basically, an unsuccessful party, whether applicant or respondent, is regarded as having been in the wrong from the outset and therefore to have caused the successful party expense.

[14] It should be clear from our opinion on the merits that the respondent had an arguable position (at least in relation to ‘Gate C’) and his opposition to the application and refusal, apparently, to consider offers on the basis of giving up the right, cannot be said to be unreasonable. He was entitled to question the reasonableness of the application and he certainly had a stateable position. However, he lost on the merits, on which the applicant succeeded. On the general rule that expenses follow success, the respondent would be liable in expenses in relation to the merits. On the other hand, the respondent was successful in his claim for compensation, although not to anything like the extent of his claim.

[15] However, we must look at the whole circumstances. There may be aspects, such as one party’s conduct of the case or the significance of offers to settle, which are relevant to the question as to who has caused the expense. In this case, we have looked at a number of such matters in addition to the extent of success.

[16] We cannot put out of our mind the view which we indicated in our opinion on the merits that problems only began when the applicant’s side started, apparently without any warning or discussion, changing the farm track into a tarmacced road and removing the grass verge. That was in about 2004. We refer to our more detailed earlier findings, including as to the position before 2004. The applicant and her late husband had bought this rural property reached by a farm track from which access was gained to a field used by dairy cows. Two of the four gates into the field were situated on the applicant’s stretch of the track. Although there might have been some uncertainty as to the existence of the servitude right, which was not noted in the applicant’s land certificate (see Para 52 of our Opinion on the merits), or as to the extent to which it had been exercised before 2004, the applicant and her husband really should not have been surprised by the farmer’s use of the track for his cows. Their actions seemed almost designed to cause trouble where there had been none before. There is a considerable difference between approaching the owner of a servitude and asking him to give up the right on the basis of meeting all his expense and taking this sort of precipitate action.

[17] It seems to us that it was quite wrong to interfere with the access route in this way without discussing the matter with the respondent. To the fact, if it be a fact, that the applicant and her husband did not know of the existence of the servitude, there are two answers: firstly, it was on the public register, i.e. the Register of Sasines; and secondly, they would have found out the position if they had only spoken to the respondent.

[18] Although the 2004 actings on the applicant’s side did not in the end of the day prevent us from concluding that, having regard to all the relevant factors, the discharge sought was reasonable, we feel that we cannot overlook, in relation to expenses, this starting point in conduct for which the applicant is responsible and which in our view was a major cause of the necessity for these proceedings and therefore of both side’s expense.

[19] The applicant’s willingness to settle carries some weight in relation to the cause of expense. It does appear to be the case that she more or less throughout recognised that her proposal should involve a willingness to pay reasonable compensation. She relies in her submissions now on her willingness to adopt either course of action recommended in the 2009 report and also her offer shortly before the hearing on the merits to pay £25,000 compensation. On the material available, it is not clear to us that she made a sufficiently clear and explicit offer, which could be regarded as the equivalent of a tender, in 2009. The 2012 offer was an offer to settle on the basis of no expenses, which is not the normal basis of a tender but perhaps reasonably reflects the particular position here where the offer was, in effect, based on the application succeeding. A reasonable time for consideration of the offer should be allowed: in this case, we think that the offer was not entirely straightforward and it would be reasonable to allow the respondent until the close of business on the day before the hearing (1 April) to decide whether or not to accept. On ordinary principles in relation to tenders and offers, the expense of at least the hearing on the merits can be said to have been caused by the respondent’s refusal to accept that offer.

[20] The position changed before the hearing on compensation, insofar as the offer of £25,000 was by then no longer on the table. In its place was an offer of £15,000 on the basis that the issue of expenses would be left for the Tribunal to decide; or alternatively, nil compensation on the basis that the applicant would not seek expenses. The linked nature of the issues of the merits of the discharge sought and compensation makes it possible to suggest that the respondent’s refusal of the offer of £25,000 also caused the hearing on compensation. In our view, however, the better approach is to look at the two hearings separately: the respondent was entitled to consider his position on the amount of compensation on the basis of the second offer, not the first which had by then been withdrawn. An appropriate analogy might be with an ordinary court claim in which the issues on the merits and quantum have been separated, the defender tenders or offers, before the hearing on the merits, a settlement above the level ultimately awarded but does not leave that offer standing and prior to the hearing on quantum makes a lower offer which the pursuer then beats. The defender can rely, in relation to the expenses of the merits, on the higher offer but can surely no longer rely on that offer when the issue is simply quantum and that offer is no longer open for acceptance.

[21] The £15,000 offer was not only substantially lower than the award which we made, but was also not a clear offer on expenses. The alternative was even less clear. In these circumstances, we do not think that that offer can rule the position on expenses. On compensation, the basic position is that the respondent was successful in establishing a substantial claim, and the fact that the applicant really all along recognised that some reasonable payment would be appropriate does not assist her when the operative offer at the time of the hearing on compensation was not effective.

[22] There is, however, another matter to be considered in relation to the expenses of the compensation claim. It seems to us that the respondent’s claim for compensation was wildly excessive. It was on a misconceived basis. The parties agreed that evidence related to compensation, but not submissions on compensation, could be heard at the first hearing, presumably on the sensible basis that even in relation to the merits there would have to be some understanding of the extent of the disadvantage to the respondent if the discharge was granted and this course would avoid experts having to attend both hearings. The Tribunal, while careful not to foreclose the issues on compensation, was able, with the assistance of its Assessor, to give an indication of at least the general nature of works required to make up for the disadvantage to the respondent. The respondent then went to a further expert who came up with recommendations and costings which bore no relationship to the indications given by the Tribunal and apparently related to provision of “a road that would be of sufficient quality to be acceptable to our client.” The Tribunal not only essentially rejected this new report but also did not accept by any means all of the submissions made on the respondent’s behalf in relation to compensation. Although the respondent ‘beat the tender’, there seems a lot to be said for the applicant’s submission that with a realistic attitude by the respondent the matter of compensation could well have been agreed. If the applicant can be blamed for the action which precipitated the proceedings, the respondent’s failure to take any sort of realistic view, even with the guidance which the Tribunal had given, on the matter of compensation, is also in our view relevant. So while we have not categorised the respondent’s position on the merits as unreasonable, we do find his approach to and conduct of the compensation claim unreasonable.

[23] We have considered dealing with these expenses issues in stages. Although the applicants succeeded on the merits and the respondent on compensation, it might be said that the procedure up to the date when the respondent should have decided whether to accept the £25,000 offer was substantially caused by the applicant’s initial conduct; the expense of the hearing on the merits by the respondent’s failure to accept that offer; and the expense of the compensation claim by the applicant, albeit the respondent’s approach to the amount of compensation was, to say the least, unhelpful.

[24] We have, however, reached the conclusion that these various matters balance out enabling an overall view to be taken. In this connection, we note that the respondent has not sought any of the initial expense which, although the applicant succeeded on the merits, was in our view to a large extent caused by the applicant’s initial actings. The only procedure to which the £25,000 offer is related is the actual two-day hearing on the merits. The pleadings, quite lengthy on both sides, and preparation for that hearing may well be comparable or more substantial items of expense. As we have said, there are things to be said on both sides in relation to the expenses of the compensation claim.

[25] In the result, we have decided in this particular case to make no award of expenses due to or by either side.

[26] The applicants sought certification of Mr Leggate as an expert witness. The respondent sought certification of Messrs Allen and Struthers as expert witnesses. We did not understand the certification of any of these three to be opposed. Our decision makes certification unnecessary, but we can record that we would certify each under our Rule 28(5).


Certified a true copy of the statement of reasons for the decision of the Lands Tribunal for Scotland intimated to parties on 30 April 2013

Neil M Tainsh – Clerk to the Tribunal