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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Johnston v Johnston [1999] ScotCS 28 (20 January 1999) URL: http://www.bailii.org/scot/cases/ScotCS/1999/28.html Cite as: [1999] ScotCS 28

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This is an action of division and sale. The parties, who are brothers, are co-proprietors of the farm and lands of Roughlands in the Parish of Larbert and County of Stirling. They are each entitled to one half pro indiviso share of the subjects, to which they acquired title by a Disposition in their favour granted by their parents in 1981 and recorded on 18 January 1982. It appears from the pleadings that between March 1996 and July 1997 various negotiations took place with a view to the termination of their common ownership of the subjects, but agreement was not reached. In September 1997 the pursuer brought this action in which he concludes for declarator of his entitlement to insist in the action, and for division of the subjects between the parties or, if division is found to be impracticable or inexpedient, for declarator that the subjects should be sold and the free proceeds divided between the parties, and for warrant to sell accordingly. The defender lodged defences, but did not dispute the pursuer's entitlement to bring an action of division and sale. The defender's only plea-in-law is to the effect that the action is unnecessary, and that the pursuer should therefore be found liable in the expenses of process. In that state of affairs, an interlocutor was pronounced on 18 November 1997 sustaining the pursuer's title to raise and insist in the action, and remitting to a reporter, Mr James Donald, a chartered surveyor, to examine the property and report on certain matters. The scope of the remit followed exactly the language of Rule of Court 45.1(1). The first matter which the reporter was directed to consider was:

The second part of the remit concerned the eventuality of the property being sold, and sought the reporter's recommendation on various aspects of the conduct of such a sale. The report which the reporter furnished is dated 24 February 1998 (No. 9 of process). After the report was lodged in process, each party lodged a note of objection to the report, and answers to the other's note of objection. The pursuer's note of objection is No. 11 of process, and the defender's answers to it are No. 12. The defender's note of objection is No. 13 (or, in its adjusted form, No. 15), and the pursuer's answers are No. 14. A hearing on the notes of objection and answers was appointed to take place, and took place before me on 6 January 1999.

The reporter narrates that the subjects comprise (i) Roughlands farmhouse, (ii) a row of three farm cottages (Skaithmuir Cottages), (iii) farm buildings and (iv) farm land extending to approximately 49.814 hectares. The farm is divided by a public road which runs north west from Carronshore. To the south west of the road, there is approximately 9.456 hectares of land together with the farmhouse, the farm buildings and the cottages. To the north east of the public road lies the remainder of the farm land, comprising an area of permanent pasture extending to some 23.993 hectares, and two areas of arable land extending to approximately 7.24 hectares and 8.171 hectares respectively. To the south and west of the subjects lie various residential developments. To the north and east lies other agricultural land. The pursuer and the defender each own adjoining farms. The pursuer owns Kirkton Farm, which lies generally to the east of the subjects, being separated from the eastmost boundary of Roughlands by a short stretch of the B9036 road. The defender owns Bensfield Farm, which lies generally to the north of Roughlands.

The reporter has found that part of the subjects may be divided equitably between the parties, but that another part cannot be divided equitably and should therefore be sold. The part which the reporter has found to be divisible is the part lying to the north east of the public road. The reporter's findings as to how the division may be effected involve:

The reporter has concluded that the part of Roughlands lying to the south west of the public road "could ... be divided equitably for agricultural purposes but could not be divided equitably, at this time, when taking possible future development into consideration". So far as the farmhouse is concerned the reporter finds that, although it could be divided "there is no reason to do so, and it would be physically difficult and expensive to carry out". He also notes that it is presently occupied on a "grace and favour" basis by the parties' mother and uncle. So far as the cottages are concerned, one is vacant, one is occupied by a retired employee on a "grace and favour" basis, and the third is let on a short assured tenancy. The reporter finds that they could not be equitably divided when viewed on their own, but could be so divided as part of a package involving other property. The farm buildings adjoin the farmhouse. The reporter finds that:

The reporter's view is, further, that in the long term the buildings would be involved along with the land which surrounds them in the development which he foresees. In these circumstances the reporter's recommendation is that the part of the farm lying to the south west of the public road, including all of the buildings, should be sold. He suggests that the rights of occupation of the farmhouse and one cottage by Mrs Johnston and the retired employee respectively might first be put on a formal footing, and that thereafter the subjects should be marketed on the basis that the price would be paid partly at the time of sale and partly in the form of a share of development value payable in the event of development proceeding. The proceeds of sale would be equally divided between the parties. The reporter indicates that it is not possible to set an upset price at this stage, but the aim should be to maximise the development potential, and a view would require to be taken before missives are concluded.

The pursuer takes no objection to the reporter's findings as to the divisibility of the part of the farm lying to the north east of the public road. His objection is to paragraph 14.4 of the report which sets out the finding that the south western part of the farm is indivisible, and should be sold. He points out that that part of the farm falls into two parts, divided by a road. (One part extends to some 5.352 hectares plus the cottages; the other to some 4.104 hectares plus the farmhouse and farm buildings.) The pursuer suggests that it would be equitable for one of these parts to be allocated to each party, and expresses willingness to accept allocation of either of them.

In developing his submissions in support of the pursuer's note of objection, Mr Anderson began by citing a number of authorities. He referred first to Gordon, Scottish Land Law, page 441, §§ 15-24 and 15-25 where, in setting out a summary of the law relating to the availability to a co-proprietor of the remedy of division or sale, after citing a passage from the opinion of Lord Rutherford in Brock v Hamilton (1852) 19 D. 701 at 703, Professor Gordon said:

Reference was also made to Thom v Macbeth (1875) 3 R. 161 in which Lord Ormidale said (at 164):

(See also per Lord Justice Clerk Moncrieff at 163-4.) In Morrison v Kirk 1912 S.C. 44, Lord Salvesen (at 47) said:

I did not understand Mr Kelly for the defender to dispute that the law is correctly set out in these authorities.

Mr Anderson also made reference to the more recent case of Williams v Cleveland and Highland Holdings Limited 1993 S.L.T. 398 in which the scope of the procedure by way of note of objection to the report, provided for at that time under the Codifying Act of Sederunt, 1913, C, ii, 13, and now under Rule of Court 45.1(6), was discussed. Lord Penrose said (at 400F, 400H-I and 401J):

The pursuer's objection to the reporter's finding in respect of the part of the farm lying to the south west of the public road is that no cogent reason is stated for the conclusion that that part cannot equitably be divided. Mr Anderson pointed to the reporter's finding that that part "could ... be divided equitably for agricultural purposes". The conclusion that division could not be achieved equitably therefore depended on "taking possible future development into consideration". There was, Mr Anderson submitted, no basis other than speculation for thinking that there was any development value to be realised. As the reporter records in paragraph 8.10 the relevant Local Plan includes Roughlands in the green belt. The Plan contains a presumption against new development in the green belt. The reporter also records that a planning application for development of part of Roughlands was turned down on appeal by the Secretary of State (I was informed that the application related to the south western part). In paragraph 8.10 the reporter continues:

Later, in paragraph 13.7, that view is repeated in more definite terms:

No basis for the view that development was a "distinct possibility" or "likely" was set out. Moreover, no clear reasons were set out for the conclusion that the existence of potential development value in the land precluded equitable division. There should therefore be a remit to the reporter (1) to reconsider his conclusion that the south western part of the farm could not be equitably divided, and (2) to set out fully his reasons for concluding (a) that development of that land was likely or a distinct possibility and (b) that the existence of that likelihood or possibility rendered equitable division impracticable.

The position of the defender in response to that objection is somewhat complicated. Mr Kelly was at pains to emphasise that the defender's preference was for sale of the whole farm, rather than division of part and sale of the remainder. He accepted, however, that the defender's note of objections did not make that point. He referred to certain passages in the Closed Record at page 7D, 11C-E and 14B. The first of these, however, relates to the contention that the subjects form a farming unit, the value of which would be reduced by division. The reporter has, however, found that the area of Roughlands is too small to constitute a viable agricultural unit (paragraphs 11.3 and 13.3). He has also found that agricultural purchasers would consider purchasing the land for addition to an existing business to gain economies of scale, but that the land is surrounded by residential development or by agricultural land in the hands of the parties. These findings seem to me to amount to a rejection of the point made at page 7D, and a powerful argument in favour of division. The land is more valuable to the parties to add to their existing holdings than it would be to any other agricultural purchaser. Mr Kelly accepted that the averments at page 11C-E, which relate to the conduct of the pursuer, do not afford any legal ground for rejecting division. The averment at page 14B is no more than a statement of the defender's willingness to consider sale. Mr Kelly confirmed, in answer to my specific inquiry, that he did not dispute that it was competent for the reporter to find that part of the land was divisible, and should be divided, while the remainder was indivisible, and should be sold. In the end, I understood it to be accepted by Mr Kelly that it was not open to the defender to argue that the whole subjects should be sold. The defender's primary position (notwithstanding his preference for sale of the whole farm) was thus that the reporter's findings and recommendations were sound and should be accepted. There was, he submitted, no need for a remit on the point raised by the pursuer.

Mr Kelly submitted that the reporter had adequately explained his conclusion as to the indivisibility of the south western part of the farm. He pointed first to what is said in paragraph 8.10. He emphasised that the Local Plan green belt policy, although it contains a presumption against development, does not absolutely prohibit it. The south western part of the farm is the only remaining agricultural land to the south west of the public road running north west from Carronshore. It is surrounded on the south and the west by residential development (paragraph 13.3). It was open to the reporter to conclude as he has done that development was likely or at least a distinct possibility. The reason for that possibility being an obstacle to equitable division of the south western part of the farm was to be found in the last part of paragraph 13.7, where the reporter said:

That view is repeated in paragraph 14.4, in which the additional point is made that if development is permitted the value of the land will increase considerably (from £1,000-£1,200 to £90,000 per acre at current prices - see paragraph 13.3), and the reporter adds:

The reporter had thus set out adequately his reasons for concluding that equitable division of the south western part of the farm was not practicable, and that sale - in the particular form suggested, which would maximise the prospect of realising the development value in due course and sharing it equitably between the parties - should be ordered.

Mr Kelly made two supplementary points against the remit which the pursuer sought. The first was a reference to the passage in Williams v Cleveland and Highland Holdings Limited at 401J, which I have already quoted. The second was that the pursuer's offer to take either half of the south western portion of the farm was of no assistance when the problem was that it was impossible to determine at this stage how any future development would be distributed between the two halves.

Mr Kelly went on to submit that if, contrary to his primary submission, there was to be a remit, the reporter should be asked to deal with an additional point. He submitted that the reporter had failed to set out how he came to the conclusion in relation to the north eastern part of the subjects that division would not involve loss of value when compared with sale. If division would involve material loss of value the appropriate course would be sale (Thom v Macbeth). The reporter had not demonstrated that division could be achieved without prejudice to the parties' interests.

I am of opinion that if the pursuer were well founded in his contention that the reporter did not have, or at least did not express, adequate reasons for concluding that equitable division of the south western part of the farm is impracticable, that would be an objection of the sort which would, consistent with the proper view of the scope of the objection procedure explained by Lord Penrose in Mitchell at 401J, justify a remit for reconsideration of that part of the report. I am not, however, persuaded that the contention is well founded. In my opinion a fair reading of the report discloses quite clearly the process of reasoning that has led the reporter to his conclusion. His starting point is his recognition that if the land were simple agricultural land with no development potential at all, equitable division would be practicable. The crux of the matter is therefore his view of the impact of development potential. It is no doubt right, as Mr Anderson pointed out, that both the development plan and the planning history indicate that development is not likely in the near future. I do not, however, consider that it does the reporter's position justice to characterise his view of the development potential as mere speculation. It is in my view right to note that the presumption against development of green belt land is only a presumption, and instances of residential development being granted planning permission in face of that presumption are far from unknown. The fact is that the south western part of the farm is surrounded on the south and west by residential developments, and is indeed the only remaining undeveloped land to the south west of the road that runs through the farm. It was a matter for the reporter to determine (since the matter had been remitted to him as a man of skill) by the application of his professional judgment whether there was any consideration which militated against equitable division. If, in the exercise of that judgment, he has concluded that the possibility of development is not so remote as to be negligible, that is a matter properly within his province. In making his assessment of that point, he was in my view entitled to balance the relative remoteness of the prospect of development against the very large increase in value which permission for development would bring. On the figures quoted in the report, the value of the 9.456 hectares comprised in the south western part of the farm could rise from a figure of the order of £25,000 to one in excess of £2,000,000. The reporter was entitled, in my view, to take the view that the loss of even a remote chance of realising a share in such an increase would be a serious matter, and that if division would entail a risk of such loss, division should be regarded as impracticable.

Of course, the mere view that there is a prospect of realising development value is not by itself sufficient to justify the conclusion that equitable division is impracticable. The other essential ingredient of the conclusion is the uncertainty as to whether, if the land were divided, the development value, if realised, would accrue equally to the two parts. In my view the reporter sets out with adequate clarity the ground for concluding that there is such uncertainty. His point is that development may be constrained in a variety of ways so that, if and when it comes about, it may benefit one part of the land in question more than the other. The considerations which he identifies in that connection are (i) the presence of a line of electricity transmission pylons, (ii) the presence of a substantial water main, (iii) the possible effect of undermining and (iv) other planning constraints. It was disputed by the pursuer that the line of pylons was still present, but even if the pursuer is right about that, the other factors remain. In my view the reporter was fully entitled to take the view that it was impossible to reach a conclusion at this juncture about how these constraints might affect the distribution of any development among the various parts of the south western part of the farm. There could readily be inequality. Since the essence of the problem is the unpredictability of how any development will be distributed, the pursuer's offer to accept either of the two suggested portions affords no solution. A way to avoid such inequality of distribution of future development leading to unequal sharing of development value between the parties is to sell the land in question as a whole, with the price being payable in part on sale and in part if and when development comes to pass, as the reporter has recommended.

In these circumstances I am of opinion that the reporter was entitled to come to the conclusion that he did, namely that because of the potential development value and the present impossibility of devising a scheme of division which would ensure that each party in due course obtained an equal share of any realisable development value, division is not practicable. Further, I am of opinion that, remote though the prospect of development may be, the reporter was entitled, as a matter of professional judgment, to regard it as material. On a fair reading of the report, I am satisfied that the reporter's reasoning is set out with sufficient clarity. I am therefore not persuaded that there is merit in the pursuer's objection, or that there is any sufficient reason to remit to the reporter to reconsider this aspect of his report.

Two points raised in the defender's note of objection were accepted by the pursuer. The first of these was that in paragraph 14.1 the reporter has recommended division of the 23.993 hectare field by the erection of a new fence running from south west to north east, but has not fixed the line of the fence. Counsel were agreed that, having regard to the history of the dispute, it would be desirable to have the line of the fence fixed by the reporter. It was, however, recognised that it would be desirable that the parties should have the opportunity of making representations, through their solicitors, to the reporter before he makes his final determination of the line of the fence. The second point was that there was a minor error in the plan which forms Appendix II to the report in respect of the boundary between Roughlands and the ground attached to West Lodge (the property to the west of field OS 8086). In the defender's note of objection reference is made to the titles of the lodge, but they are not produced. In my view the first of these points may properly be regarded as ground for a remit to the reporter. The original remit was inter alia to advise how division might be effected. The determination of the precise line of the new fence may be regarded as a part of that remit which has not been exhausted. I shall therefore remit to the reporter to fix the line of the fence. The second point appears to me to be de minimis and, if it had stood alone, I would have been reluctant to make it the subject of a remit. However, since there is to be a remit to fix the line of the fence, and since a correct understanding of the boundary between the farm and the lodge may have a minimal effect on the line of the fence, I shall include in the remit a direction to have regard to the correct boundary as shown in the titles to the lodge.

I am not persuaded that the reporter should be asked to reconsider whether division of the north eastern part of the farm will occasion loss which would be avoided by sale. I accept that if it appears that division will involve loss which would be avoided by sale, sale is the appropriate course (Thom v Macbeth). The reporter sets out in the second part of paragraph 13.1 his understanding of the law, in terms which indicate that he has properly understood the correct approach to the question of divisibility. It is therefore not, in my view, readily to be supposed that the reporter has failed to follow that approach. The reasonable inference seems to me to be that, if the reporter has found the north eastern part of the farm to be divisible, he has not found that division thereof would incur material loss which would be avoided by sale. It is not in my view essential for the reporter to set out expressly that he has found that division would not entail material prejudice. The reporter has treated the north eastern part of the farm as agricultural land. There is, in my view, no ground for thinking that he was in error in doing so. The only question of development potential relates to the other (south western) part. When regard is had to the reporter's conclusions as to the marketability of the farm as agricultural land, namely that it is too small to be viable as an independent unit, that the land would only be attractive to an agricultural purchaser for addition to another unit, and that the parties are the only near agricultural neighbours (paragraph 13.3), it is clear that there is no question of the land being more valuable on sale than it is to the parties on division. There is therefore, in my opinion, no substance in Mr Kelly's submission that the reporter requires to explain more fully how he reached the conclusion that division would not involve material loss.

In the result therefore I propose to remit to the reporter for the limited purpose which I have identified. The terms of the remit which I propose are:

Since it was the defender who raised the question as to the boundary of West Lodge, it will be for his solicitors to provide the reporter with a copy of the titles to that property. Before making the remit I shall, as was discussed at the hearing, put the case out By Order to give parties an opportunity to comment on the terms of the proposed remit.