Factual and Procedural Background
This commercial dispute arises from a series of transactions involving the Plaintiff family farming at a property known as Sunwick Farm in the Scottish Borders, which they have farmed for over 60 years. The Plaintiffs assert that they were victims of a fraudulent scheme orchestrated by an individual identified as Mr. Frost, culminating in the loss of the family farm. The Plaintiffs (the first and second individuals and a company controlled by the first) seek production and reduction of a sheriff court decree dated 20 June 2022 granted in favour of the Defendant, a commercial lender, in an action against Orrdone Farms Ltd (formerly Avocet Agriculture Ltd, in administration). This decree purportedly requires the removal of occupants from Sunwick Farm, which is currently occupied by the Plaintiffs who claim lawful tenancy under a lease dated 20 September 2016 granted by Hamilton Orr Ltd (HOL).
The Defendant opposes reduction of the decree and counterclaims that the Plaintiffs have no right to occupy the farm, asserting the lease is a sham or not a valid lease under Scots law, and was entered into in bad faith. The third Plaintiff company was dismissed for failure to appear, but the counterclaim remains live against it. The matter proceeded to proof before Lord Braid, with the Plaintiffs appearing as party litigants and the Defendant represented by counsel.
The Plaintiffs do not allege the Defendant was involved in any fraud, nor do they seek reduction of the standard security on which the decree was based. The remedies sought would only delay eviction, not restore ownership or reduce the Defendant's security. The dispute involves complex factual and legal issues relating to the validity of the sheriff court decree and the status and enforceability of the lease.
Legal Issues Presented
- Have the Plaintiffs proved a relevant ground for reduction of the sheriff court decree?
- Is the lease dated 20 September 2016 genuine, what is its legal status, and was it entered into in good faith?
Arguments of the Parties
Plaintiffs' Arguments
- The Plaintiffs contend that the sheriff court decree should be reduced because it was granted without knowledge of material considerations, including the alleged fraudulent scheme by Mr. Frost.
- They assert that the first Plaintiff is the lawful tenant by virtue of a lease granted by HOL, which confers rights on the Plaintiffs to occupy the farm and prevents lawful eviction under the decree.
- The Plaintiffs allege Mr. Frost acted fraudulently in orchestrating transactions that led to the loss of the farm and that the lease was part of their legitimate rights.
Defendant's Arguments
- The Defendant opposes reduction of the decree, arguing no relevant grounds have been proved by the Plaintiffs to justify such relief.
- The Defendant contends the lease is a sham, not a valid lease under Scots law, and was created to interfere with enforcement of the Defendant’s security.
- Even if the lease exists, it does not confer a real right enforceable against the Defendant as a secured creditor, and the first Plaintiff entered into it in bad faith by failing to disclose its existence.
- The Defendant maintains that the Plaintiffs have delayed in pursuing their claims and have not established a substantive defence to the sheriff court action.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Barton v Wright Hassall LLP [2018] 1 WLR 1119 |
Party litigants must comply with court rules equally; no special indulgence that would render the system unfair. |
Applied to emphasize that the Plaintiffs, as party litigants, were bound by substantive law and evidence rules. |
| AW, Applicant [2018] CSIH 25; Aslam v Royal Bank of Scotland [2018] CSIH 47 |
Scottish authority confirming the principle that party litigants must comply with procedural rules. |
Supported the court’s approach to procedural fairness and evidential standards for the Plaintiffs. |
| Robertson's Executor v Robertson 1995 SC 23; Royal Bank of Scotland Plc v Matheson 2013 SC 146 |
Reduction of sheriff court decree is an equitable, discretionary remedy; requires consideration of all circumstances to do substantial justice. |
Guided the court’s evaluation of whether reduction of the decree was justified based on available evidence. |
| Burnett v Menzies Dougal WS 2006 SC 93 |
Relevance and sufficiency of averments in pleadings; unsupported beliefs are irrelevant. |
Used to reject the Plaintiffs’ sparse pleadings based on "believed and averred" formula without supporting evidence. |
| Wallace v Simmers 1960 SC 255 |
A lease must confer a real right enforceable against third parties, not merely a personal right. |
Applied to determine that the lease did not confer a real right enforceable against the Defendant as secured creditor. |
| Rodger (Builders) Ltd v Fawdry and others 1950 SC 483; Gibson v Royal Bank of Scotland Plc 2009 SLT 444 |
Good faith requirement for a tenant to have enforceable rights against third parties; bad faith may be inferred from circumstances. |
Supported finding that the first Plaintiff was not in good faith when entering the lease, justifying reduction on that ground. |
| Muirhead & Turnbull v Dickson (1905) 7 F 686 |
Contractual intention is assessed objectively by what parties say, not their innermost thoughts. |
Used to conclude that the lease was intended to have contractual effect despite subsequent conduct. |
| Crawford v Bruce 1992 SLT 524 |
Courts cannot fill gaps in contracts by implication where essential terms are uncertain. |
Applied to hold that the lease’s lack of a mechanism to calculate rent rendered it void for uncertainty and not a valid lease. |
| Chaplin v Assessor for Perth 1947 SC 373 |
Exclusive possession is essential for a lease to confer a real right. |
Applied in finding the lease did not confer exclusive possession, thus not a real right. |
Court's Reasoning and Analysis
The court began by noting the Plaintiffs’ failure to produce any evidence regarding the circumstances in which the sheriff court decree was granted. Despite the Plaintiffs’ allegations of fraud by Mr. Frost, there was no evidence implicating the Defendant or providing a substantive defence to the sheriff court action. The court emphasized that reduction of a sheriff court decree is a discretionary equitable remedy requiring substantial justice, which was not demonstrated here.
The court found that even if the sheriff was unaware of the Plaintiffs’ lease, this would not have prevented decree against Orrdone Farms Ltd, the registered owner at the time. The Plaintiffs had delayed in pursuing their claims, further undermining their position. Consequently, the court refused reduction of the decree and sustained the Defendant’s pleas in this respect.
Regarding the lease, the court found it was not a sham document but questioned whether it constituted a valid lease conferring a real right enforceable against the Defendant. Essential elements of a valid lease—identifiable rent and exclusive possession—were lacking. The lease provided for sharing profits without a clear mechanism to calculate rent, and the first Plaintiff did not have exclusive possession, as the farm was also possessed by Avocet companies. Thus, the lease conferred only a personal right against HOL, not enforceable against third parties like the Defendant.
The court further found that the first Plaintiff was not in good faith when entering the lease, as he was aware of the standard securities and the need to disclose any lease but failed to do so, and the lease was kept secret from other family members and the Defendant. This bad faith justified reduction of the lease.
Accordingly, the court sustained the Defendant’s pleas to reduce the lease and granted the counterclaim for removal of the Plaintiffs from the farm.
Holding and Implications
The court’s final decision was to DISPOSE OF the Plaintiffs’ action. The sheriff court decree was not reduced, and the lease was reduced ope exceptionis due to bad faith and failure to meet the legal requirements of a lease conferring a real right.
As a result, the Defendant is entitled to enforce the sheriff court decree and remove the Plaintiffs from Sunwick Farm. The Plaintiffs have no enforceable right to remain in occupation under the lease. No new precedent was established; the decision affirms established principles regarding reduction of decrees, requirements for valid leases, and good faith in property transactions.