Agricultural holdings — Succession — Whether drawings from a farming partnership account are derived from agricultural work where more than 50% of the net profit is attributable to non-agricultural sources
In September
1988 the respondent’s father, who held an agricultural tenancy of a 147-ha
holding from the applicant landlords, died. The holding had been farmed by the
respondent and his father through a partnership. In 1983, 1985, 1987 and 1988
the respondent’s drawings from the partnership were attributable not to farming
profits for those years but to injections of capital from himself, his father,
banks and family loans; in only three of the seven years before the father’s
death did the respondent draw sums which exceeded 50% of the farming net
profits to which he was entitled. On the respondent’s application, the
Agricultural Land Tribunal made a direction under section 39 of the
Agricultural Holdings Act 1986 entitling him to a tenancy of the holding on the
ground that during the relevant period the respondent was engaged in agricultural
work on the holding and his principal source of livelihood was his drawings
from the farm business whether or not there were net profits to which he was
entitled generated by that business to fund the drawings. The landlords
appealed, contending that the respondent failed to satisfy the test in section
36(3)(a) of the 1986 Act that his principal source of livelihood was
from his agricultural work on the holding for five of the seven years before
his father’s death.
nomenclature are irrelevant. Money which goes into a farming account from
sources other than agricultural work on a holding, and which is then withdrawn,
will not be a ‘source of livelihood . . . derived from agricultural work on the
holding’ for the purposes of section 36(3)(a) of the 1986 Act.
Accordingly the respondent had failed to satisfy the test.
The following
cases are referred to in this report.
Bailey v Sitwell [1986] 2 EGLR 7; (1986) 279 EG 1092
Pepper v Hart [1993] AC 593; [1992] 3 WLR 1032; [1993] 1 All ER 42,
HL
Trinity
College, Cambridge v Caines (1983) 272 EG
1287, [1984] 2 EGLR 17
This was an
appeal by the applicants, Sir Richard Bruno Gregory Welby Bt and D&S Farms
Ltd, by way of a case stated from the direction of an Agricultural Land
Tribunal made on March 21 1992 that the respondent, Thomas Andrew Casswell,
should succeed to an agricultural tenancy of Casthorpe Farm, Barrowby,
Grantham.
Paul Morgan QC
(instructed by Burges Salmon, of Bristol) appeared for the applicants; Edward
Cole (instructed by Mills & Reeve, of Cambridge) represented the
respondent.
Giving
judgment, POPPLEWELL J said: This is a case stated from the Agricultural
Land Tribunal chaired by Mr Christopher Beaumont. The decision was dated March
21 1992. The issue involved related to the transfer of a tenancy. The
respondent’s father was the tenant of some 147 ha of land at Casthorpe Farm,
Barrowby, Grantham.
The
applicants, Sir Richard Bruno Gregory Welby Bt and D&S Farms Ltd, are the
landlords. The respondent began to work for his father in November 1980. He
went into partnership with his father in March 1981. The father died on
September 18 1988. The son then applied to the tribunal for a direction under
section 39 of the
succession to his father.
The tribunal
found in favour of the son on March 21 1992 and application was made for a case
to be stated on June 12 1992. It is in relation to that case stated that the
hearing has been conducted.
I start by
paying tribute to the way that the tribunal dealt with this case both in
relating the evidence which it heard and in setting out the case stated.
It is
necessary first to set out the statutory framework within which this application
is made. By the Agriculture (Miscellaneous Provisions) Act 1976, provision was
made to enable a close relative to apply to a tribunal to become tenant of a
farm in succession to a deceased. Prior to that a landlord was entitled to
terminate the tenancy of an agricultural holding and to recover possession on
the death of the tenant. The 1976 Act was amended by the Agricultural Holdings
Act 1986, one effect of which was that the possibility of succession did not
apply to an entirely new tenancy granted on or after July 12 1984.
It is
therefore to the Agricultural Holdings Act 1986 that I now turn because that is
the Act which governs the result of this case. Part IV of that Act reads:
‘Succession on Death or Retirement of Tenant’. Section 34, ‘Tenancies to which
Part IV applies’ provides:
(1) The provisions of this Part of this Act shall
have effect with respect to —
(a) any tenancy of an agricultural holding
granted before 12th July 1984, . . .
There is no
dispute that the tenancy of this agricultural holding comes within that
provision.
Section 35(1),
‘Succession on death of tenant’ provides:
Sections 36 to
48 below . . . shall apply where —
(a) an agricultural holding is held under a
tenancy which falls within paragraph (a) or (b) of section 34(1)
above, and
(b) the sole (or sole surviving) tenant (within
the meaning of that section) dies and is survived by a close relative of his.
(2) . . . ‘close relative’ of a deceased tenant
means — . . .
(c) a child of the deceased.
There is no
dispute, but that the respondent in this case comes within that definition.
Section 36 is
the section which is of prime importance in this case. The heading is: ‘Right
of any eligible person to apply for new tenancy on death of tenant’. Section
(1) reads:
Any eligible
person may apply under section 39 below to the Tribunal for a direction
entitling him to a tenancy of the holding unless excluded by subsection (2) or
section 37 or 38 below.
Subsection (2)
does not apply in the instant case. Subsection (3) reads:
For the
purposes of this section and sections 37 to 48 below, ‘eligible person’ means
(subject to the provisions of Part I of Schedule 6 to this Act and without
prejudice to section 41 below) any surviving close relative of the deceased in
whose case the following conditions are satisfied —
(a) in the seven years ending with the date of
death his only or principal source of livelihood throughout a continuous period
of not less than five years, or two or more discontinuous periods together
amounting to not less than five years, derived from his agricultural work on
the holding or on an agricultural unit of which the holding forms part, and
(b) he is not the occupier of a commercial unit
of agricultural land.
Para (b)
does not apply in the instant case and therefore it is (a) which has to be
considered.
Schedule 6,
Part I reads:
1. –(1) In this Schedule —
‘the
livelihood condition’ means paragraph (a) of the definition of ‘eligible
person’ in section 36(3) of this Act;
2. For the
purposes of the livelihood condition, any period during which a close relative
of the deceased was, in the period of seven years mentioned in that condition,
attending a full-time course at a university, college or other [establishment
of higher or further education] shall be treated as a period throughout which
his only or principal source of livelihood derived from his agricultural work
on the holding; but not more than three years in all shall be so treated by
virtue of this paragraph.
Section 39
reads:
(1) An application under this section by an
eligible person to the Tribunal for a direction entitling him to a tenancy of
the holding shall be made within the period of three months beginning with the
day after the date of death.
(2) Where only one application is made under this
section the Tribunal, if satisfied —
(a) that the applicant was an eligible person at
the date of death, and
(b) that he has not subsequently ceased to be
such a person.
shall
determine whether he is in their opinion a suitable person to become the tenant
of the holding.
In this case
the question of whether the respondent was a suitable person was a matter
before the tribunal. They resolved that in favour of the respondent and that is
no longer an issue in the case.
Subsection (8)
applies to decisions made under subsection (2):
In making a
determination under subsection (2) above in the case of a particular applicant
. . . the Tribunal shall have regard to all relevant matters including —
(a) the extent to which the applicant or each of
those applicants has been trained in, or has had practical experience of,
agriculture,
(b) the age, physical health and financial
standing of the applicant or each of those applicants, and
(c) the views (if any) stated by the landlord on
the suitability of the applicant or any of those applicants.
That goes
primarily to suitability. In addition there is a section which entitles an
applicant who is not fully eligible under section 36(3) to make a separate and
concurrent application. Section 41 reads:
(1) This section applies to any surviving close
relative of the deceased who for some part of the seven years ending with the
date of death engaged (whether full-time or part-time) in agricultural work on
the holding, being a person in whose case —
(a) the condition specified in paragraph (b)
of the definition of ‘eligible person’ in section 36(3) above is satisfied, and
(b) the condition specified in paragraph (a)
of that definition, though not fully satisfied, is satisfied to a material extent.
Paraphrasing
that, it enables an applicant who may not be a full-time agricultural worker
and whose livelihood is not principally dependent on his agricultural work to
make an application under this section.
The tribunal
has a discretion which appears as follows. First, there is a time-limit. 41(2)
reads:
A person to
whom this section applies may within the period of three months beginning with
the day after the date of death apply to the Tribunal for a determination that
he is to be treated as an eligible person for the purposes of sections 36 to 48
of this Act.
(3) If on an application under this section —
(a) the tribunal are satisfied that the applicant
is a person to whom this section applies, and
(b) it appears to the Tribunal that in all the
circumstances it would be fair and reasonable for the applicant to be able to
apply under section 39 above for a direction entitling him to a tenancy of the
holding,
the Tribunal
shall determine that he is to be treated as an eligible person for the purposes
of sections 36 to 48 of this Act, but shall otherwise dismiss the application.
By subsection
(6):
Without
prejudice to the generality of paragraph (b) of subsection (1) above,
cases where the condition mentioned in that paragraph might be less than fully
satisfied include cases where the close relative’s agricultural work on the
holding fell short of providing him with his principal source of livelihood
because the holding was too small.
It is not in
dispute at the Bar that the phrase ‘principal source of livelihood’ connotes
51%. There is a decision of Judge Edgar Fay in relation to section 41 that the
phrase ‘material extent’ in 41(1)(b) can mean 25% or more.
In this case
the respondent did not apply under section 41 and is now out of time. The
reason for that is not known to the court and is in any event irrelevant to its
construction of section 36(3).
The questions
which the tribunal set out in the stated case were:
The questions
of law for the opinion of the High Court are:
(i) In those periods in which the farming
business carried on on the subject holding by the Applicant and his late father
made losses, or profits amounting to less than half the monies drawn by the
Applicant and disbursed on living expenses, and in which capital injections
were made into the business from outside sources did the Applicant derive his
principal source of livelihood from his agricultural work upon the subject
holding within the meaning of section 36(3)(a) of the Agricultural
Holdings Act 1986?
(ii) Were we right to accept the submission of Mr
Rodger that the distinction between an applicant who is an employee of an
unprofitable business from which he is paid wages and an applicant who is a
proprietor of a farming business which does not generate profits, but who
nevertheless draws from the business, is an ‘absurdity’ and that the ‘position
of an employee and a partner were logically indistinguishable as to whence
their livelihoods were derived’?
(iii) Were we right, on the facts as found by us,
to hold that the applicant had satisfied the principal source of livelihood
test adumbrated in section 36(3)(a) of the Agricultural Holdings Act
1986?
(iv) Whether, in the provision of section 36(3)(a)
of the Act referring to ‘a continuous period of not less than five years or two
or more discontinuous periods together amounting to not less than five years’
the period or periods referred to need be (i) separate whole years all ending
on the date of death or its pre-anniversaries or (ii) whole farm financial
years plus possibly the part farm financial year starting seven years before
the death and the other part farm financial year ending with the death or may
be (iii) any numbers of identifiable periods, of any lengths, beginning and
ending on any dates amounting in total to at least five years out of the
relevant seven years.
That last
question raises interesting and difficult points. It is accepted at the Bar,
however, that in the instant case it does not call for a conclusion. Given the difficulties
which arise and the many practical problems which it may encompass, it seems to
me unwise to embark on a determination of question (iv).
I turn
therefore to the findings of fact to which the tribunal came. The tribunal have
helpfully set out first the issue that they have to consider and subsequently a
very detailed review of all the evidence in the case. It is not necessary to
make reference to all the matters referred to in their review because the
matters appear starkly in para 6 of the stated case. It reads:
The issue in
this case was as follows:–
The Applicant
being a partner with his late father in the farming business, made drawings
from the farming business with which to disburse his living expenses. On
analysis in only three farm financial years within the seven years ending with
the date of his father’s death had the Applicant made drawings from accumulated
farming net profits which exceeded 50% of the amount actually drawn. We were
satisfied that the gross receipts of the business substantially exceeded the
monies drawn by the Applicant even in the other farm financial years within
that seven-year period, but the net profits did not. The capital deployed in
the farming business in the relevant period included injections of capital by the
Applicant and his father from outside sources, family loans and increases in
the bank overdraft. The issue between the parties was over the proper
construction of the requirement of section 36(3)(a) of the Act that the
Applicant to be eligible had to show the derivation from agricultural work on
the holding of his principal source of livelihood. If in the case of a
proprietor of the farming business this meant that he had to demonstrate
sufficient net farming profits to constitute the principal source of his living
expenses, the Applicant was only able to pass the livelihood test in three of
the farming financial years in the seven years ending with the date of death.
If it were sufficient for him to show that he was engaged in agricultural work
on the holding and his principal source of livelihood was his drawings from the
farm business whether or not there were net profits to which he was entitled
generated by that business to fund the drawings, then he had satisfied the test
for the whole relevant period. We found that the latter requirement was all
that he needed to satisfy the test and we found the facts as set out in our
Statement of Reasons.
It is
necessary only to refer to one or two factual matters in the statement of
reasons. There is no dispute but that the applicant had been born, bred and
brought up on the holding. In November 1980 he began working full time for his
father on the holding. They became partners in 1981. He worked long hours full
time. There was some income from sources other than the partnership arising
from farming, but the tribunal considered that and it is reflected in their
decision.
When he was
cross-examined he agreed that in 1983, 1985, 1987 and 1988 his drawings were
not attributable to the profits of those years nor to previous years but to
injections of capital from himself, his father, banks and family loans.
During the
course of argument the point was raised that if a farm made a profit in a
particular year which was not fully drawn on but in subsequent years it was
drawn on, to what extent could that be held to be the principal
livelihood? That raised interesting
academic arguments. Upon the facts of this case, however, they do not arise
because it is quite clear from the evidence that the sums in the farming bank
account were not the result of any profit from previous years’ work.
The agent for
the landlord in cross-examination said:
He accepted
that all drawings came from cash receipts of the partnership on the farm
account.
I take that to
mean in the light of the evidence that the money that was drawn was drawn from
the bank account which was a farming bank account.
Those are the
material matters which are before the court. The question which has to be
considered is whether the tribunal were right in their conclusion.
The argument
for the landlord is a very simple one: you look to see whether the applicant is
carrying out agricultural work on the holding and the answer to that is ‘Yes’.
You then look to see whether his principal source of livelihood is derived from
that agricultural work and whether that continued for five out of the seven
years. It is submitted that it is not enough to show that he has carried out
agricultural work on the holding full time, working hard, even devoting his
life to that agricultural work; he must show that his principal source of
livelihood derived from that agricultural work.
By way of
example, if for a period of time the farm never makes a profit, but he happens
to have a private income and is living on the interest from his stocks and shares,
however much time he devotes to the farm the principal source of livelihood is
not derived from that agricultural work; it is derived from the interest on his
stocks and shares. As I understand it, that argument is not in dispute. In this
case, say the landlords, the evidence is clear that the principal source of his
livelihood was derived from outside sources.
Mr Edward
Cole, on behalf of the respondent, says that the profitability is more related
to the question of suitability under the Act in that, if a tenant is not
operating the farm profitably, it may go to the question of whether he is
running the farm properly; that profitability and the word ‘profit’ does not
appear anywhere in the Act. His contention can be put simply: that if in fact
the money that he is drawing is money which is in a farm account, it matters
not from where the money comes. Provided it is invested in the farm business
and the applicant draws money from it, then his principal source of livelihood
is derived from the agricultural work.
I ought to say
that there is no decision of a tribunal or of the court directly on this point.
Webster J had
to consider the question of money banked in one year being used for a following
year in Trinity College, Cambridge v Caines (1983) 272 EG 1287,
[1984] 2 EGLR 17. At p1291 he said:
The second
question is: ‘Whether sums credited to’ Mrs Caines ‘in the accounts of the
Farming Partnership of which she was a member by way of her share of the
profits of the said Partnership during the period of seven years ending with
the death of’ Mr Caines ‘can, to the extent that they remained undrawn by’ Mrs
Caines ‘and were accordingly not applied in maintaining or sustaining her,
properly be said to have constituted a source of livelihood of’ Mrs Caines.
Webster J went
on at p1292 to say:
But as she
drew only about one-quarter of her share, her investment income during that
period represented about 125% of her withdrawn profits.
The tribunal
decided ‘that source of livelihood’ — within the meaning of those words in the
relevant paragraph of the definition of ‘eligibility’ — ‘must mean something
more than’ — drawn — income and that the whole of the income both drawn and
undrawn must . . . be taken into account’. They go on to state that had they
‘taken a different view and had they considered that undrawn income should not
be taken into account they would have been forced to the conclusion that the
principal source of livelihood of the applicant was not derived from work on
the holding’.
Mr
Langdon-Davies, on behalf of the landlords, submits that only money actually
drawn can constitute a source of livelihood and that if regard is had only to
the drawn profits, he would adopt the tribunal’s conclusion that ‘the principal
source of livelihood’ of Mrs Caines ‘was not derived from work on the holding’.
Mr Pryor, on behalf of Mrs Caines, submits that the word ‘livelihood’ is apt to
cover undrawn income and that the words ‘source of livelihood’ have the effect
that, even if the word ‘livelihood’, contrary to his contentions, does not
cover undrawn income, nonetheless, the words ‘source of livelihood’ extend the
effect of that word so as to cover it.
I conclude
[said Webster J] that the expression ‘source of livelihood’ means what the
applicant spends or consumes on her ordinary living expenses from time to time
in money and/or kind and that it does not include money that she has available
to spend but does not in fact spend for that purpose.
Applying that
meaning to the facts of this case, I would conclude that her ‘sources of
livelihood’ throughout the relevant period of seven years, ending with her
husband’s death, were in this order: firstly, her husband’s drawings from the
farm and, almost certainly, his private income; secondly, her private income;
and, thirdly, her drawings from the farms.
. . .
But returning
to the meaning of the expression ‘source of livelihood’, I reject the meaning
for which Mr Pryor contends. I also reject his contentions about the effect of
the added words ‘source of’. It may be the case that one year’s undrawn profits
were a source of livelihood for the following year if the applicant had ever
drawn in one year profit that had accumulated in earlier years, but over the
period in question it is clear that Mrs Caines in this case did not ever do that.
I conclude
that Mrs Caines’ drawings did not constitute her ‘principal source of
livelihood’.
The respondent
in this case relies on a decision of Hodgson J in Bailey v Sitwell
[1986] 2 EGLR 7. At p7 Hodgson J said:
The facts are
somewhat unusual.
At the time
of the application, the applicant was a man of 49 years of age. In 1961 he had
formed a partnership with his father. The terms of the partnership, certainly
later on and perhaps from the beginning, were that the profits would be shared,
four-fifths to go to the applicant and one-fifth to the father, but that the
liability for losses would be shared equally. That no doubt reflected the fact
that it was the applicant who was actually working the farm.
. . .
In 1978, the
father was unfortunate enough to have a stroke. That had the effect that from
1978 onwards, after the stroke, the applicant had to spend a great deal of time
looking after his father. Consequently, he had to hire help on the farm which
had the effect of reducing the profit that the farm could make. The father died
on October 25 1983. The father was in receipt of a pension and he was also in
receipt of a substantial attendance allowance owing to his disability. There
was also a deposit account which, I think, was in the father’s name.
Unfortunately, because it led to considerable confusion later, the father and
the applicant had one bank account. It was a farming bank account. They did not
have any other bank account, so into that account the pensions and attendance
allowance were paid. For the purpose of the application the applicant produced
the accounts of the partnership during the seven years preceding the father’s
death. As the applicant had, during those seven years, worked on the farm and
worked nowhere else and had no other source of income, save only in so far as
the pensions payable to his father could be called a source of income, the
applicant and his advisers no doubt approached the application with feelings of
substantial confidence. But just before the case was due to come on, the
solicitor then appearing for the respondents told counsel appearing for the
applicant that at the end of the opening of the applicant’s case he was going
to make a submission, the nature of which was not made clear at that time. What
the respondents had done, I understand, was to take the accounts provided by
the applicant and from them make what they called an analysis of the capital
position which was marked ‘ARP7’. Those accounts show that in 1977, 1978, 1979
and 1980 the business made net profits of which the son’s entitlement amounted
to something over £14,000 of which he drew less. However, in 1981 the course of
the business went totally wrong and during that year there was a net loss of
something over £14,000 made. The position at the bank had deteriorated from
something over £9,000 in 1977 to just over £1,300 at the end of that disastrous
year in 1981. In 1982 and 1983 the trend continued. At the end of 1983, on the
father’s death, the position at the bank was that there was an overdraft of something
over £9,000, although the business, I am told, was worth some £35,000 for
probate.
. . .
The first
place where, it seems to me, the tribunal went wrong, is that they never did
more than look at the total period of seven years . . . I can find nothing in
the decision or the case to indicate that they ever had any regard to the
five-year period which counsel tells me is the one that he attempted to choose,
that is the period between 1977 and 1981. That error in law would, in my
judgment, be sufficient for me to send this case back to the tribunal with an
expression of opinion that they should consider not the whole seven years but
the five years which the applicant was entitled to choose.
The tribunal
seem to have gone on to conclude that the applicant’s actual drawing of £889.52
for the year 1981 could not have come from the net profits of that year; and
therefore, necessarily, he could not fulfil the requirement that his livelihood
derived from his agricultural holding in that year. That cannot be right if
that was what the tribunal were deciding. What they seem to have focused on is
the fact that in that year, 1981, the father not only paid his attendance
allowance and pension into the joint account but also, as he had done in the
previous year, paid into the business and into his capital account in the
business two sums from his deposit account.
I stop there.
We do not know from this case whether the sums which the father had paid into
the business were moneys which had come from previous years’ profits. Hodgson J
continued:
Therefore,
what is said is that during that year, the £889.52 which the son drew from the
business as the result of his agricultural work was not derived from his
agricultural work but was derived from his father’s pension, attendance
allowance and deposit account. It seems to me that that is an awfully muddled
and wrong way to look at the matter. During that year, as he had done during
the previous four years, the applicant had worked the farm and had drawn the
only money that he drew from anywhere from the business. The mere fact that
during that year, 1981, some part of the capital employed in the business came
from the father cannot, in my judgment, affect the matter at all. The tribunal
appears to have been equating the position of the applicant and his father with
the position of husband and wife, merely because they lived in the same house
and the applicant, as well as doing his farming work, looked after his father
in his illness.
The analogy
to me seems wrong. It was almost accidental that the money from the pension and
the attendance allowance was paid into the joint account and was shown in the
joint account. If it had been paid into a separate account for the father, and
he had then, from time to time, invested some of that money into the farm and
into his capital account for the farm, I do not think that the tribunal could
ever have been led into the error which they seem to me to have been led into.
The son, over those five years, drew a small but steady income from the farm.
There was no evidence and it was never suggested that he drew any money from
anywhere else and it seems to me that when, as they must, the tribunal look
again at the five years from 1977 to 1981, they should be more careful than
they were to identify what part of the total expenditure on the livelihood of
the household was the applicant’s and what was the father’s.
Mr Cole relies
on that decision as showing, in effect, that once money has come into a farming
account it is there as a source of livelihood on which an applicant is entitled
to rely. It matters not one bit what the source of that money is provided it is
to be used for the farming business. While he accepts that if ‘Aunt Maud’ (the
example given in the course of argument) should decide to make up any loss that
an applicant had each year by simply providing him with money, that would not
be good enough. If that money from ‘Aunt Maud’ is paid into a farming account,
or if money is lent by a bank or overdraft facilities are provided and it goes into
a farming account for use in the farm, then the provisions of the section are
complied with.
He drew my
attention to the injustice which would flow from the landlord’s construction in
the instant case. He gave by way of example two sons, one of whom was a partner
and one of whom was an employee. The employee’s son, in a year when the farm
made no profit, would nevertheless get his wages. It would be clear that,
absent any other source of income, those wages would be the principal source of
livelihood, they would be derived from agricultural work and he would be
entitled to succession. Contrast that, says Mr Cole, with the
way that the partner can live is to draw on money provided by the bank by way
of overdraft. It would be very unfair if two sons in that position were to be
differently treated.
It is accepted
by Mr Paul Morgan that that would indeed be the consequence of his argument. He
points out, however, that people are entitled to arrange their affairs to suit
what is best for them. For instance, an employee will have different rights and
liabilities in relation to the business (both in relation to common law, tax
and so on) from a partner and that people can arrange their affairs as they
think fit. It may be that if affairs are arranged in one way it will have
different consequences from them being arranged in another way.
Second, Mr
Cole points out that if, for instance, a farm, through no fault of the tenant,
goes through a series of bad patches (there is a depression, the weather in two
or three years is unfriendly and the crops fail) it would be very unfair if
that were to have an adverse effect on the succession. To that the landlord
replies, ‘That was the purpose of section 41’. Section 41 envisaged a situation
in which on one basis there might not be very much profit because the holding
was too small as a specific example, but as a general example that if the
profits were small, but the tenant had worked very hard, there was a discretion
in the tribunal to allow the succession to go on. In the instant case it is
said that if this respondent had chosen to make an application also under
section 41 he might well have succeeded. I make no observation about that.
Mr Cole also
submitted that in the light of the parliamentary discussions giving rise to
this Act, the interpretation which he put on this section was the correct one.
He referred me both to Pepper v Hart [1993] AC 593 and to the
debate which took place in the standing committee on the second reading. I have
very grave doubt whether the conditions set out in Pepper v Hart
are in fact fulfilled in the instant case. However, no objection was taken to
my looking at the debate in the standing committee. Dealing with an amendment
that the words ‘or principal’ in the section should be omitted, Mr Gavin
Strang, Parliamentary Secretary to the Ministry of Agriculture, Fisheries and
Food, said [Hansard March 23 1976, committee C at column 898]:
It is
important that the Agricultural Land Tribunal should have a criterion to enable
it to decide whether an applicant is eligible. We take it to be part of our
scheme that the applicant should have a definite link with the holding and that
it is insufficient for him to be a near relative. I think there is agreement on
both sides of the Committee that it would be unreasonable to give the son who
had, perhaps, spent the last 50 years in Australia the right to come back on
his father’s death and take over the holding. Once we decide there should be a
link with the holding we have to decide the best way of writing that into the
law.
There was then
discussion as to whether it might be possible to write into the Act that the
link with the holding should be for a period of years and that somebody who was
working there should have worked full time. Mr Strang went on to say [at column
901]:
It is easy to
see how we came to the conclusion that the best way to decide whether he was
working full time on the holding was to specify that his principal source of
income should have come from working on the holding. Hon Members have raised
the point about the word ‘only’. This was simply to bring out a whole range of
options from ‘only’ to ‘principal’. Strictly speaking, the word ‘only’ is
redundant and ‘principal source’ would cover it. It is a semantic point. It is
clear that we are saying his principal source of income should have been the
holding.
At a later
stage he said:
The Hon
Member has raised a valid point. Naturally we gave some thought to this question
as to how we would define this requirement. The more we thought about it the
more we came to the conclusion that we really wanted to give the tribunal a
degree of flexibility here. After all, we are going to have a tribunal looking
at this initially. Having got that situation, Hon Members might agree that we
are likely to have fewer anomalous cases and injustices if, on balance, we give
the tribunal greater rather than less scope to decide what constitutes a
principal source of livelihood. If we were to lay down that it had to be over
50 per cent or 70 per cent, that would be too rigid. The sensible thing is to
use the phraseology which we have got in the new clause.
Then a little
further on he says:
A requirement
that the Applicant has to have derived his sole or principal livelihood from
the holding for at least five out of the last seven years is our way of
achieving this.
It is quite
clear that Parliament had not condescended to deal with a number of problems
that were likely to arise. Additionally, it is quite clear that if the sole
purpose of this clause was to ensure that somebody who had a close connection
with the holding and worked on it should be included, it has clearly not
fulfilled its purpose in the situation with which I have already dealt where
there is no profit and a tenant is living effectively on his stocks and shares.
He has a definite link with the holding, he is a near relative, but it is
accepted that the Act would not cover him.
Accordingly, I
do not get any very sensible help from the debates in the House. I therefore
have to construe what appears to me clear on the face of the Act. I find
nothing in the Act to suggest that drawings from a farming account, unless they
are derived from farming, are to be treated any differently from stocks and
shares which do not go into a ‘farming account’. The nature of the account and
its nomenclature are, in my judgment, irrelevant. The fact that the money is to
be used for farming is neither here nor there. It is not money which comes, as the
section says, from agricultural work on the holding. It is money coming from
‘Aunt Maud’, it is money coming from the bank, and it is money coming from
private sources. Although, as it was submitted in argument, a bank is unlikely
to lend money unless the farm is going to be viable, that is irrelevant in my
judgment.
I accept the
anomalies created in relation to an employee and a partner, but that is not a
good reason for not giving what, in my judgment, is clear expression to the
words of the Act.
In so far as
Hodgson J’s decision in Bailey is concerned, I have some doubt as to
whether on the material in the judgment it is possible to determine exactly
what was the source of the applicant’s money. If Hodgson J is saying that it
was money in the bank account which came from a source which was not
agricultural work, with very great respect to him I am afraid I have to differ.
Accordingly,
going back to the questions which have been posed by the tribunal, in the light
of the facts which they found in para 6 (namely, that the sources of income for
the majority of years did not derive from the respondent’s agricultural work
but were injections of capital by the respondent and his father from outside
sources, family loans and increases in the bank overdraft) I find that the
answers to questions 1, 2 and 3 must be ‘No’.
Order
accordingly. Leave to appeal granted.
