R A McMASTER AND OTHERS AGAINST THE SCOTTISH MINISTERS
OUTER HOUSE, COURT OF SESSION
[2017] CSOH 46
P321/15
OPINION OF LORD CLARK
In the cause
(FIRST) (i) R A McMASTER, (ii) R & N McMASTER, a firm, (iii) N A McMASTER and (iv) F M McMASTER, all having a place of business at Springfield, West Bennan, Isle of Arran;
(SECOND) (i) J R HALLEY (SNR), (ii) JAMES ROBERTSON HALLEY, a firm and (iii) J R HALLEY (JNR), all having a place of business at South Cassochie Farm, Methven, Perthshire PH1 3RT;
(THIRD) (i) C S MITCHELL, (ii) MAINS OF LARG FARMERS, a firm, (iii) M A MITCHELL and (iv) F C MITCHELL, all having a place of business at Mains of Larg Farm, New Luce, Newton Stewart, Wigtownshire DG8 0AT;
(FOURTH) (i) D SHAW, (ii) FIRM OF HILLHEAD FARMING COMPANY, a firm, (iii) THE CROFTHEAD FARMING COMPANY, a firm, (iv) J G SHAW and (v) C R SHAW, all having a place of business at Crofthead Farm, Sorn, Mauchline, Ayrshire KA5 6HW; (FIFTH) (i) A A STODDART, (ii) A C STODDART & SONS (COLSTOUN 1995), a firm and (iii) E C STODDART, all having a place of business at Colstoun Mains Farm, Haddington, East Lothian EH41 4PB;
(SIXTH) (i) W N DOUGLAS, (ii) DAMHEAD FARMS, a firm, (iii) MESSRS W N DOUGLAS, a firm, (iv) I W DOUGLAS, (v) W N D DOUGLAS and (vi) O B DOUGLAS, all having a place of business at Catslackburn, Yarrow, Selkirk TD7 5NE; and
(SEVENTH) (i) J D PATERSON, (ii) J D PATERSON TRADING AS THE FIRM OF GLENREE FARMERS, a firm, (iii) I W PATERSON, (iv) T J PATERSON and (v) C PATERSON, all having a place of business at Glenree Farm, Ross Road, Sliddery, Isle of Arran KA27 8NY
Petitioners
against
THE SCOTTISH MINISTERS
Respondents
Petitioners: Sir Crispin Agnew of Lochnaw QC, Blair; Davidson Chalmers LLP
Respondents: Mure QC, Ross QC; Scottish Government Legal Directorate
21 March 2017
Introduction
[1] The petitioners aver that they are all persons who have suffered loss, injury and damage as a result of the passing of section 72(10) of the Agricultural Holdings (Scotland) Act 2003 (“the 2003 Act”) and the making of the Agricultural Holdings (Scotland) Act 2003 Remedial Order 2014 (“the Remedial Order”). The Remedial Order was enacted in order to rectify defects in the 2003 Act which had been identified by the Inner House of the Court of Session and the Supreme Court in Salveson v Riddell 2013 SC 69, 2013 SC (UKSC) 236.
[2] The essence of the petitioners’ case is that the enactment of the Remedial Order, without the Scottish Parliament making provision in it for the assessment and payment of compensation to the petitioners, and the subsequent refusal by the Scottish Ministers to meet the petitioners’ claims for compensation, violate the petitioners’ rights under Article 1 of the First Protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms (“A1P1”).
[3] The petitioners argue that the Remedial Order is therefore outside the legislative competence of the Scottish Parliament. Accordingly, the orders sought include declarator that the Remedial Order is incompatible with the petitioners’ A1P1 rights. The petitioners also seek compensation in this process for the alleged violation of their A1P1 rights.
Background
[4] The background to the 2003 Act has been fully explained by the Lord President, Lord Gill, in Salveson v Riddell 2013 SC 69 (paras [7] – [32]) and by Lord Hope of Craighead in Salveson v Riddell 2013 SC (UKSC) 236 (paras [8] – [21]). For present purposes, I need only explain a few key parts of that background.
[5] In terms of the statutory regime governing agricultural holdings in Scotland as set forth in the Agricultural Holdings (Scotland) Act 1948 and later legislation, tenants enjoyed indefinite security of tenure. The landlord could serve a notice to quit, but this would be effective only if the Land Court consented and there were limited circumstances in which such consent could be granted. The tenant also had the statutory right to bequeath the tenancy, in which case the tenant’s successor would become the tenant, with the same security of tenure.
[6] In order that landlords could retain the right to repossess their land notwithstanding the statutory security of tenure, the practice developed of landlords granting new agricultural tenancies to limited partnerships. Commonly, the landlord or his nominee was the limited partner and the individual farmer was the general partner. The limited partnership had a fixed duration, as did the lease to the limited partnership. The limited partnership and the lease could, however, be continued yearly by tacit relocation. The landlord had the power to terminate the limited partnership at the end of its fixed duration or on any anniversary. A landlord who wished to obtain vacant possession could serve a notice dissolving the limited partnership. On the date of dissolution, the legal person which was the tenant ceased to exist, thus terminating the tenancy. This practice of granting tenancies to limited partnerships became widespread in the market for agricultural holdings in Scotland.
[7] At the turn of this century, it became the policy of the Scottish Executive that a new system should be introduced. It was proposed that the new system would disallow future leases to limited partnerships and offer security of tenure to the tenant, but that it would also give the landlord the right to recover vacant possession at the end of a fixed term. The duration of the fixed term would be agreed by the parties before the tenancy began. The landlord would then be entitled to intimate his intention to terminate the tenancy, at an appropriate point in advance, and to terminate it by giving notice to quit.
[8] In May 2000 the Scottish Executive published a White Paper, entitled ‘Agricultural Holdings—Proposals for Legislation’. This proposed that a new fixed term tenancy should be created and that it should no longer be possible to create new tenancies where the tenant was a limited partnership. The White Paper expressly stated that existing tenancies granted to limited partnerships would not be affected. The Agricultural Holdings (Scotland) Bill, as introduced on 16 September 2002, reflected this policy. It proposed that the Agricultural Holdings (Scotland) Act 1991 would not apply to future tenancies unless the lease was entered into in writing before the commencement of the tenancy and the lease expressly stipulated that the 1991 Act was to apply. It also contained provisions allowing the tenant under a 1991 Act tenancy a pre-emptive right to buy if the land which was the subject of the tenancy was marketed for sale.
[9] On 3 February 2003, a marshalled list of amendments to the Bill was published. Included in the list was a proposed amendment to the effect that general partners who had received notice of dissolution of their limited partnership on or after 4 February 2003 could apply to the Land Court for an order allowing them to continue as tenants in their own right, that is, under the 1991 Act. If such an order was granted, the tenant would also be able to take advantage of the right to buy provisions.
[10] It was in that context that, on 3 February 2003, notices were served on behalf of several landlords to terminate the limited partnerships which held the tenancies of their farms. Some of the limited partnerships had several years to run and in terms of the notices would terminate at the end of that period.
[11] Further amendments were proposed by the Scottish Executive on or about 10 March 2003. One of these further amendments was to the effect that if a notice terminating a limited partnership was served during the period between 16 September 2002 and prior to the relevant date (which became 1 July 2003), the general partner could become tenant in his own right by giving notice to the landlord. The landlord could apply to the Land Court for an order that the provision allowing the general partner to become tenant did not apply.
[12] As enacted, the 2003 Act contained provisions to the following effect. If a landlord of an agricultural tenancy in which a limited partnership was the tenant had given notice on or after 16 September 2002 terminating the limited partnership, the tenancy continued with the general partner as the tenant in his own right, if the general partner in turn gave notice to that effect (section 72(6)). The landlord could apply to the Land Court, in terms of section 72(7)-(9) of the 2003 Act, for an order under section 72(8) that the general partner did not become the tenant, but the circumstances in which such an order could be obtained were very restricted.
[13] Where a landlord served a notice on or after 1 July 2003 terminating the limited partnership, section 73 applied. In terms of section 73, the landlord could terminate the tenancy by giving notice of his intention to do so at least two years but not more than three years before the date of the expiry of the duration of the lease (as stipulated in the contract of lease) or the date of expiry of a period of relocation, and by then serving a notice to quit not less than one year and not more than two years before the date of expiry. The second notice of this ‘double-notice’ termination procedure required to be served not less than 90 days after the first. In terms of section 72(10), section 73 Act did not apply to landlords who had served a notice dissolving the limited partnership between 16 September 2002 and 30 June 2003 (“the relevant period”).
[14] The key feature of note is that the section 73 procedure for termination by the landlord was not available to landlords who had given notice of dissolution of the limited partnership which was the tenant in the relevant period but it could be used where the notice of dissolution of the limited partnership was served on or after 1 July 2003. The consequence of this, of critical importance in the present case, was that those tenants upon whom a notice to terminate the limited partnership was served during the relevant period were, by serving notices under section 72(6), able to obtain secure tenancies under the 1991 Act, which could only be terminated by notice to quit in the very limited circumstances provided by sections 21 to 24 of the 1991 Act.
[15] In Salvesen v Riddell 2013 SC (UKSC) 236, the Supreme Court declared that section 72(10) of the 2003 Act was incompatible with the landlord’s A1P1 rights and hence was outside the legislative competence of the Scottish Parliament. The Supreme Court’s order dated 24 April 2013 suspended the effect of that declaration for 12 months, or such shorter period as might be required for the defect to be corrected by remedial legislation. The Remedial Order was made on 2 April 2014 and came into force the following day. Its effect was retrospective so that, in formal terms, section 72(10) of the 2003 Act had never been law.
[16] The Supreme Court held that the difference in treatment between landlords who had served dissolution notices between 16 September 2002 and 30 June 2003 and those landlords who had served notices on or after 1 July 2003, was discriminatory, unfair and disproportionate and did not pursue an aim that was reasonably related to the aim of the legislation.
The Remedial Order
[17] In the Policy Note and the Business and Regulatory Impact Assessment which accompanied the draft Remedial Order, the effect of the Remedial Order was described. The Policy Note wrongly refers to limited liability partnerships, which are of course a different form of legal entity from limited partnerships. These documents explained that there were three situations in which landlords had served notices of dissolution of a limited partnership between 16 September 2002 and 30 June 2003 for which solutions were required under the Remedial Order. The first situation involved landlords who had served notices of dissolution which would result in dissolution on a date occurring after the Remedial Order would come into force. For those landlords (described in the Consultation Paper as “group 1”) the Remedial Order would provide for the section 73 termination process. The second situation was where the general partner had served a notice under section 72(6) and the landlord either had not applied for an order under section 72(8) or had done so but had then withdrawn from that process. For those landlords and tenants (described in the Consultation Paper as “group 2”) the Remedial Order would provide the option to the landlord that he could, by giving notice, bring the tenancy within the section 73 termination process. The third situation was where the general partner had served a notice under section 72(6) and the landlord had applied to the Land Court for an order under section 72(8) but the application had not yet been determined. For those landlords and tenants (described in the Consultation Paper as “group 3”), the Remedial Order would provide that if the case were to be removed from the Land Court, the section 73 termination process would apply, and if not, the Land Court would have discretion to decide when it would be reasonable for landlords to recover possession. Where there had been a sale of the farm, or the parties had reached their own bilateral agreement, the Remedial Order would not apply.
[18] In implement of these intentions, Article 2 of the Remedial Order repealed certain parts of section 72 of the 2003 Act, including sections 72(7) to (11). It also inserted a new section (section 72A) into the 2003 Act. In terms of section 72A(1), section 73 applies unless the tenancy is a ‘relevant tenancy’. A ‘relevant tenancy’ is defined as a tenancy continuing to have effect by virtue of section 72(6) where the tenancy purports to be terminated as a consequence inter alia of a notice of dissolution served before 1 July 2003 and where the section 72(6) notice was served before 3 April 2014 and there is no ongoing application by the landlord for an order under section 72(8) in respect of the tenancy.
[19] In terms of section 72A(2), if the tenancy is a relevant tenancy, then other than in prescribed circumstances, section 73 applies where the landlord has given an ‘application notice’ within 12 months from 28 November 2014. Section 72A(3) defines the prescribed circumstances. These are where the landlord’s interest was purchased after the section 72(6) notice was given and at a time when it was no longer possible to make an order under section 72(8) that section 72(6) does not apply and has never applied, or where the landlord acquired the landlord’s interest in the tenancy from (a) the landlord who purchased that interest in those circumstances, or (b) a successor of such a landlord. An ‘application notice’ means a notice in writing intimating that the landlord may bring the tenancy to an end in accordance with section 73.
[20] In terms of section 72A(1), section 73 applies to cases in which there is an ongoing application to the Scottish Land Court for an order under section 72(8). However, by virtue of Article 3 of the Remedial Order, the Land Court is given a discretion in these cases as to the disposal of the ongoing applications. This includes, but is not limited to, power on the part of the Land Court to specify shorter periods of notice than specified in section 73(4) and (5) of the 2003 Act, and to specify the date on which the tenancy is to be terminated. Articles 4 and 5 of the Remedial Order make transitional and savings provisions.
[21] Accordingly, for present purposes, in broad terms the Remedial Order has the effect that a landlord who had served a notice of dissolution of the limited partnership between 16 September 2002 and 30 June 2003 could take up the right to use section 73 to terminate the tenancy, by giving notice (an ‘application notice’) within the stated period that he may do so. However, where the landlord’s interest had been purchased by the landlord or his predecessor, at a time when it was no longer possible to obtain an order under section 72(8), or where the parties had reached their own bilateral agreement, the right to terminate under section 73 could not be taken up by the landlord. Section 73 also applies in cases of ongoing applications to the Land Court for an order under what was section 72(8), but the Land Court has the discretion outlined above in relation to termination of those tenancies.
[22] In the result, apart from cases which fall outside the Order because of a sale or a bilateral agreement, those persons who had received notices of dissolution of the limited partnership which had been the tenant, given in the period 16 September 2002 to 30 June 2003, and who had then served notices under section 72(6), no longer had tenancies with the full security of tenure under the 1991 Act. Those persons were now in the position that the landlord could terminate the tenancy under section 73 (in the same way as for those persons who had received notice of dissolution on or after 1 July 2003) or (where the landlord had applied for an order under section 72(8)) the question of termination could be dealt with by the Land Court.
[23] At the heart of the petitioners’ complaints in this case is that the Remedial Order created a situation in which the right to a secure 1991 Act tenancy could be lost, without compensation being paid.
[24] The Business and Regulatory Impact Assessment refers to the consultation process which had been undertaken about the proposed Remedial Order, including the involvement of the Scottish Parliament’s Rural Affairs Climate Change and Environment (“RACCE”) committee and the Delegated Powers and Law Reform (“DPLR”) committee. The Business and Regulatory Impact Assessment goes on to state:
“The draft proposed order does not make provision for a compensation scheme. We are aware from the consultation, in general terms only, that some individuals may seek to advance compensation claims. Any case would require to be considered on its own facts and circumstances. No judgment could be made in the abstract as to whether any claims have any merit…
Having fully considered the consultation responses and the submissions and evidence sessions of the RACCE and DPLR Parliamentary committees, it is considered inappropriate to include a compensation scheme within the order.”
The Petition
[25] This petition was raised by a total of 30 petitioners, split into seven sets, representing seven separate farms. At the commencement of the First Hearing, the second set of petitioners abandoned their claims. Accordingly, the petition proceeded with 27 petitioners, split into six sets.
[26] Each set of petitioners includes the former general partner (or joint general partners) of the limited partnership which had been the tenant of particular farming land, upon whom a notice of dissolution of the limited partnership had been served on 3 February 2003 and who had in turn served notices under section 72(6). The other members of each set of petitioners are understood to be family members of the general partner or partners, and also one or more partnerships or limited partnerships.
[27] In cases where the landlord had not applied to the Land Court for an order under section 72(8), or had applied but then did not proceed with the application, the general partners became tenants with secure 1991 Act tenancies. That is the position of the general partners in the first, third and fourth sets of petitioners.
[28] In cases where the landlord had applied to the Land Court for an order under section 72(8) the general partner became the tenant, but subject to the possibility of that right being lost if the Land Court upheld the landlord’s application. These applications had been sisted and had not yet been determined on the date of the coming into force of the relevant provisions in the Remedial Order. This is the position of the general partners in the fifth, sixth and seventh sets of petitioners.
[29] The parties were in agreement that the first hearing should determine whether or not, in principle, the petitioners are entitled to compensation. This would be the result if the court were to hold either that the Remedial Order was unlawful in that it failed to make provision for a regime to assess compensation, or that the decision of the Scottish Ministers to refuse to accept liability to pay compensation to the petitioners was unlawful.
[30] If the court so held, it was submitted by the petitioners that the claims for compensation should be remitted to separate hearings either in the Court of Session or the Land Court or the Lands Tribunal for Scotland. It was explained that the petitioners’ individual compensation claims had not been adjusted to date pending a determination as to whether, in principle, compensation is due.
A1P1
[31] As is noted above, the petitioners’ claims are advanced on the basis of an alleged breach of the petitioners’ rights under A1P1, which provides as follows:
“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”
[32] It is to be noted that the opening words of the first paragraph refer to “Every natural or legal person…” and later in the paragraph reference is made to “his possessions”. This makes clear that, for a particular person to come under the protection of A1P1, there has to be interference with the possessions of that person.
Submissions for the Petitioners
[33] In summary, the submissions for the petitioners were as follows.
Background and General
[34] The general effect of the 2003 Act on the petitioners was that they were given a significantly enhanced property right. This had now been lost. The landlord had invoked the procedure permitted under the Remedial Order in all of the cases. All of the tenancies had been brought to an end, albeit that the actual date of termination for some is in the future. In these circumstances, there was ‘an ECHR right’ to compensation. The Remedial Order should have made provision for compensation, for example by setting up a scheme for application to the Land Court or the Lands Tribunal for Scotland. Alternatively, the Scottish government should have stated that it would deal with compensation claims. The exclusion of compensation from the Remedial Order meant that the Scottish government was not recognising a right to compensation. In any event, when claims were submitted to the Scottish Ministers, the decision was made not to give compensation. This offended against the principle of proportionality and so was in violation of the petitioners’ A1P1 rights.
Victim Status and Interference with Possessions
[35] The petitioners each had ‘victim status’ for the purpose of the ECHR and therefore also for the purposes of the section 100(1) of the Scotland Act 1998 and section 7(7) of the Human Rights Act 1988. The possessions of all petitioners had been devalued and the family business had been affected. Reference was made to AXA General Insurance v Lord Advocate [2012] 1 AC 868.
Possessions
[36] The petitioners’ property rights or possessions included the leases, the farming businesses connected therewith, upon which the family were reliant, and the legitimate expectation created by the passing of section 72 of the 2003 Act. It was well known to the Scottish Ministers that, where there was a tenancy of a farm, it was in reality a family farming business where one member of the family was the tenant. The petitioners who were not general partners had a legitimate expectation of benefiting from the tenancy. The only purpose of the tenancy was to run the family farming business.
[37] The petitioners have all been affected by the loss of the tenancy and farming business and in some cases have had their plans for succession disrupted. Öneryildiz v Turkey (2005) 41 EHRR 20 illustrated that the concept of possessions is not limited to existing possessions, but includes those which a person has a legitimate expectation of acquiring.
[38] In the present case the tenants were given (as a result of section 72(10) of the 2003 Act) a tenancy with a value of somewhere between 25% and 50% of the open market value of the land which was subject to the tenancy. This was taken away from the tenants in order to give back to the landlord vacant possession of the subjects.
[39] The limited partnerships among the petitioners had acted in reliance on the prospective effect of section 72 of the 2003 Act until the general partner served the section 72(6) notice.
[40] Accordingly, all of the petitioners have been affected by the Remedial Order. In addition, the individuals amongst the petitioners have suffered worry and stress.
[41] The lease was a possession for the purposes of A1P1: Mellacher v Austria (1990) 12 EHRR 391; Lancashire County Council v Taylor [2005] 1 P & CR 2. The farming business carried on in respect of the lease of an agricultural holding was a possession for the purposes of A1P1: Lancashire County Council v Taylor; Tre Traktörer Aktiebolag v Sweden (1991) 13 EHRR 309; Adams v Advocate General 2003 SC 171; Stretch v United Kingdom (2004) 38 EHRR 12. The taking away of the tenancy was a deprivation of a possession and equally was a deprivation of the economic interest in the business.
[42] The European Court of Human Rights has recognised that the right to dispose of one’s property constitutes a traditional and fundamental aspect of the right of property. This right of disposal of the tenancy was itself a possession of the general partner or joint general partners in each group of petitioners and the legitimate expectation of succession was a property right of the family member: Marckx v Belgium (1979) 2 EHRR 330.
[43] Legitimate expectation is recognised as a possession for the purposes of A1P1: Pine Valley Developments Ltd v Ireland (1992) 14 EHRR 319; Stretch v UK; Kopecký v Slovakia (2005) 41 EHRR 944. Deprivation of that legitimate expectation meant that the party deprived of it has victim status.
[44] The interest of the petitioners was not purely hypothetical as in Willis v the United Kingdom (36042/97) 35 EHRR 21. Rather, there was a real risk that each petitioner would be directly affected: Burden v United Kingdom 47 EHRR 38. Lallement v France (2002), App No 46044/99, was analogous to the present case.
[45] The petitioners had no way of knowing that the relevant provision of the 2003 Act (section 72(10)) was not compliant. It was not until the decision of the Inner House of the Court of Session in Salveson that the industry learned that provisions in section 72 of the 2003 Act were potentially outwith the powers of the Scottish Parliament because they were not consistent with the landlord’s Convention rights.
[46] Moreover, after the Inner House decision in Salveson, the industry, including the petitioners, could reasonably expect that, if the decision was upheld on appeal to the Supreme Court, the Scottish government would not take away rights that had vested under section 72 from parties such as the petitioners without provision for compensation. To do so without provision for compensation would be, in effect, to act retrospectively and would be unfair and disproportionate.
[47] The Scottish Parliament could not have intended the petitioners’ Convention rights to be interfered with without compensation, particularly in light of what had been stated in a letter dated 5 December 2014 from the Cabinet Secretary for Rural Affairs, Food and the Environment to the Convenor of the RACCE committee and also in representations made to that committee in evidence sessions.
[48] UK law and the authorities on the ECHR normally presume that retrospective vested rights will not be taken away without compensation because it would otherwise be unfair: cf. Secretary of State for Energy v Friends of the Earth [2012] Env LR 25.
Interference
[49] In respect of one category of petitioners (the first, third and fourth sets of petitioners) the general partners had been given a secure tenancy, by virtue of having served a notice under section 72(6) which had not been the subject of an application to the Land Court by the landlord for an order under section 72(8). This enhanced the value of their tenancy and gave them long term security of tenure and the other benefits of a 1991 Act tenancy on which they could operate the family farming business. The Remedial Order has now removed that enhanced right and their tenancy has been or will be ended along with the family farming business that was linked to and dependent on that tenancy. As the Lord Justice Clerk had pointed out in Salvesen, section 72 had given rise to a reduction in value of the landlord’s holding - the converse was an increase in value of the tenancy.
[50] The general partners in the other category of petitioners (the fifth, sixth and seventh sets of petitioners) had also become tenants, having served notices under section 72(6). Alternatively, those in this category could be viewed as having lost the chance of continuing with a secure 1991 Act tenancy, as a result of the Remedial Order: Kyle v P & J Stormonth Darling, WS 1993 SC 57; Hunter v Student Awards Agency for Scotland 2016 SLT 653. The European Court of Human Rights also recognises that a ‘claim’ is a possession: Paul v Ogilvy 2001 SLT 171; Trgo v Croatia, App No 35298/04, 11 June 2009.
[51] The Remedial Order amounted to a deprivation of possessions rather than a control of use under A1P1. In reality, it was known that as a result of the Order the secure 1991 Act tenancy would inevitably be lost. This was not therefore a case of control of use. It was necessary to look behind appearances and to investigate the realities of the situation. In reality, all landlords have exercised their rights under the Remedial Order to terminate the leases. The reality therefore was that there had been a deprivation of property.
Proportionality
[52] Having regard to the approach to the question of proportionality taken in Bank Mellat v HM Treasury [2014] AC 700, it was not disputed that the objective of the Remedial Order was sufficiently important to justify the limitation of a protected right, or that the measure was rationally connected to the objective. The Remedial Order was one way in which to rectify the position as regards the landlords’ rights under A1P1 but it was not the only way of doing so – the inclusion of a scheme for compensation or acceptance of claims for compensation was the proportionate response to the problem.
[53] Any interference with the petitioners’ property or possessions must achieve a fair balance and be proportionate. The availability of compensation is material to the assessment of whether or not a fair balance has been struck and if there is no compensation this is normally viewed as a disproportionate interference with property rights: Salvesen v Riddell 2013 SC (UKSC) 236; James v United Kingdom (1986) 8 EHRR 123; Azzopardi v Malta, App No 28177/12, 6 Nov 2014. Where a person bore an individual and excessive burden that would not be proportionate.
[54] Further, the European Court of Human Rights has recognised that a step in a procedure that will ultimately lead to a deprivation of property can itself be an interference with A1P1 rights: Erkner v Austria (1987) 9 EHRR 464; Papamichalopoulos v Greece (1993) 16 EHRR 440; Salvesen v Riddell 2013 SC (UKSC) 236; Pressos Compania Naviera SA v Belgium (1985) 21 EHRR 301.
[55] Unlike Adams v Advocate General 2003 SC 171, there was no proper consideration of the issue of compensation and hence no actual exercise of a discretionary area of judgement. Indeed the converse was the case and the Scottish Ministers had suggested to the RACCE committee that compensation would be considered. Reference was made to Wilson v First County Trust Ltd (No 2) [2004] 1 AC 816.
[56] By analogy with Pressos Compania Naviera SA v Belgium, the present case involved retrospective legislation that deprived tenants of rights given to them, so compensation required to be paid.
[57] The court had to carry out a substantive review in relation to proportionality. The decision maker has to justify the interference: Hunter v Student Awards Agency for Scotland.
[58] Unlike the HMRC in Al -Fayed v Commissioners of Inland Revenue 2004 SC 745, the respondents have not given any undertaking that those affected will not be prejudiced. As in Breyer Group plc v DECC [2015] 1 WLR 4559, the respondents did not take account of the clear reliance by the petitioners on the terms of the unamended legislation over a considerable tract of time, the scale of the interference with the possessions of the petitioners and the impact the amendment would have on existing businesses.
[59] In approaching the issue of whether a fair balance was struck, the analysis of the court must be a practical one. It is not an exercise to be carried out in abstracto. This is because the protection of Convention rights has to be practical and effective: Artico v Italy (1981) 3 EHRR 1; Hunter v Student Awards Agency for Scotland.
[60] In R v Secretary of State for Health ex p East side Cheese [1999] 3 CMLR 123 reference was made to payment of compensation being more appropriate “where property is being transferred from one citizen to another”. That was effectively what had occurred in the present case.
[61] Worry or stress is allowed as a head of damages by the European Court. It was a misunderstanding to view compensation paid on waygoing as being sufficient. Waygoing payments did not constitute compensation for loss of tenancy rights.
[62] The European Court of Human Rights has recognised that where the state is at fault in giving a right or possession, which it ought not to have given, and then takes it away, the state requires to compensate the party concerned: Hutten-Czapska v Poland (2007) 45 EHRR 4. In Klibaviciene v Lithuania, App No 34911/06, the court in effect accepted that when property is wrongfully given and then taken back this can be a deprivation. Retrospective legislation, such as the Remedial Order, which deprived persons of possessions cannot in general be justified and if it is to be justified it should make provision for compensation. In Draon v France, compensation terms were material to assessing whether or not a fair balance had been struck. Compensation is a material consideration in the assessment of fairness and taking property without compensation is normally a disproportionate interference: Pressos Compania Naviera SA v Belgium. Mistakes or errors of the State authorities should serve to the benefit of the persons affected, where no other conflicting private interest is at stake, and so the risk of any mistake by the State authority must be borne by the State and the errors must not be remedied at the expense of the individual concerned: Gashi v Croatia, App No 32457/05, 13 December 2007.
Submissions for the Respondents
[63] In summary, the respondents’ submissions were as follows.
[64] The first hearing should focus upon the issue of principle: whether the A1P1 rights of the various petitioners had been violated, with the consequence that the respondents were liable to pay compensation to them. That issue of principle should be answered in the negative. The court should dismiss the petitions, in terms of the respondents’ first and third pleas in law. If the court decided the question of principle in favour of the petitioners, it would be appropriate for the case to be put out by order to determine further procedure.
Background and General
[65] Prior to the 2003 Act, the rights of the limited partnerships were precarious, because the landlord could give notice, in terms of the contract creating the limited partnership, to bring it to an end. Landlords would use powers to end tenancies if they felt their interests were under threat, as indeed occurred on 3 February 2003. The dissolution notices served on 3 February 2003 ended the limited partnerships from a date to come in the future. The position at that stage was that the general partner knew his limited partnership was coming to an end and his rights would end with it.
[66] The discrimination effected by section 72(10) of the 2003 Act had no justification. The provisions interfered with the landlords’ rights, not just by neutralising dissolution notices which had already been served in respect of the limited partnerships, but by giving the general partner a right in terms of section 72(6) to obtain a secure 1991 Act tenancy.
[67] The 2003 Act did not oblige the general partner to pay anything to the landlord in consideration for the exercise of the rights under section 72(6) and the acquisition of a secure 1991 Act tenancy. Accordingly, when the general partner chose to use section 72(6), he was exercising a right that he had not paid for and which he had no reason, prior to the 2003 Act, to expect would be given to him. It was a route made available to him after the dissolution notice in respect of the limited partnership had been served. The general partner, therefore, obtained a windfall or unexpected benefit. This was a factor to be borne in mind when the court was considering whether or not a fair balance had been struck by the passing of the Remedial Order.
[68] But for the discriminatory provisions contained in the 2003 Act, landlords would have been able to terminate their tenancies under the double notice procedure. As they could not do so, the general partners continued to enjoy use of the tenancy until after the date of coming into force of the Remedial Order.
[69] The 2003 Act, in section 72(10), did not have any automatic effect but rather gave the general partner a route through which a secure 1991 Act tenancy could be acquired. Similar points could be made about the Remedial Order. In terms of the Order, the State was not requiring the landlord to act but was respecting agreements reached between the tenant and the landlord.
[70] In terms of the Convention Rights (Compliance) (Scotland) Act 2001, a Remedial Order requires public notice and a consultation period. In the present case there was a lengthy consultation period, including consultation with the Scottish Parliament. The underlying social purpose of the Remedial Order was to restore the 2003 Act to a Convention-compliant position, but in a prospective manner.
[71] The Cabinet Secretary had not closed the door to claims for compensation – the possibility of a valid claim was not ruled out. However there was no representation made by him that compensation would be payable.
[72] The claims for compensation made to the Scottish Ministers had been considered on their own facts and circumstances. The proposal for mediation was predicated on the basis of the landlords and tenants taking part, which did not happen. The Scottish Ministers had concerns about the contents of the claims made by the petitioners including the wide‑ranging nature of the claims and the number of individuals seeking compensation.
[73] The State itself was not a party to the contracts of lease. Rather, by the Remedial Order, it was seeking to adjust the rights and obligations of landlord and tenant in order to achieve a legitimate aim. Unlike the cases referred to by the petitioners, involving a transfer of a possession to the State, in the present case the State was not arrogating any rights to itself. The Remedial Order did not deal with what had happened in the past – it involved the continuing relationship between the landlord and tenant moving forward. It did not adjust the effect of past events.
Victim Status and Interference with Possessions
[74] Each petitioner must establish victim status and a breach of his Convention rights. The petition does not provide the court with information to justify the presence of many of the petitioners in the instance. The petitioners’ averments about the property rights which they claimed had been affected were irrelevant and lacking in specification.
[75] By the 2003 Act, the ability to acquire a secure 1991 Act tenancy was given to the general partners. No property right was given to any other persons. No authority had been cited by the petitioners supporting the claims of the indirect victims in the present case and so the use of expressions such as the “family farming business” was irrelevant. If the concept could be extended in that fashion, then a wide variety of legal persons could claim interference with Convention rights in respect of property held by others. The argument that, because a tenancy could be bequeathed, the potential successor had some legitimate expectation or asset was misconceived.
The Petitioners’ General Averments
[76] As for those petitioners who were general partners in limited partnerships, the averments about their property rights were irrelevant. Section 72 of the 2003 Act did not give any property right to such general partners. Rather, it provided a possible process (under section 72(6)) by which a general partner might seek to obtain a 1991 Act tenancy, subject to the landlord’s right to apply for an order under section 72(8).
[77] A similar point arose in relation to the vague reference to “the family farming business”. Every applicant, whether a natural or a legal person, must demonstrate the existence of a right to the property at issue: X, Y and Z v Germany, App No 8387/78, 19 DR 233. The property rights protected by A1P1 must be existing ones and not contingent interests: Inze v Austria (1987) 10 EHRR 394.
[78] The petitioners’ case in so far as founded upon a “legitimate expectation” was misconceived. In the cases relied upon by the petitioners, Pine Valley Developments Ltd v Ireland, Stretch v United Kingdom and Klibaviciene v Lithuania, the State directly granted the right or ancillary right in issue. This was very different from the present case, which involved a contractual relationship between landlord and tenant (in which tenancy the State was not a party).
[79] The legitimate expectation tag was being used by the petitioners to cover a multitude of embarrassments in order to seek to validate claims by a number of people. The concept of legitimate expectation in the Strasbourg jurisprudence is related to a component part of the property.
[80] It must have been reasonably foreseeable to the petitioners that the interference with the landlord’s rights was in violation of their A1P1 rights. Esto any reliance on any rights gained by the petitioners was reasonable (which the respondents do not accept), such reliance was not reasonable after October 2010.
[81] The second petitioner in several of the groups of petitioners is described as a limited partnership. There was no explanation as to the basis upon which the limited partnership could have a legitimate expectation.
[82] In these circumstances, the petitioners’ grounds of challenge as articulated in the pleadings were irrelevant and lacking in specification.
The Position of Individual Petitioners
[83] Where a general partner was shown to have obtained the tenancy then A1P1 is engaged, but the Remedial Order strikes a fair balance in all of the circumstances and the claims for compensation by the general partners in respect of such tenancies should be rejected.
[84] Apart from the general partners, the petitioners do not qualify as victims and they have no title to sue in respect of alleged breaches of A1P1 rights of the general partner petitioners. In some situations there had been a bilateral agreement in respect of the landlord’s application to the Land Court (for an order under section 72(8) that section 72(6) did not apply) in settlement of that application. Such a bilateral agreement allowing the tenancy to continue placed parties outwith the terms and effects of the Remedial Order. In respect of several sets of petitioners, there were issues as to the validity of notices, including section 72(6) notices. If these were invalid, then the general partners had not obtained a tenancy and hence were not affected by the Remedial Order.
Interference, Deprivation or Control of Use
[85] The Remedial Order did not deprive tenants of their tenancies. It merely afforded to an affected landlord the opportunity to serve a notice in order to obtain vacant possession of his land. By doing so, the landlord would obtain vacant possession years after he would contractually have been entitled to obtain it, had it not been for section 72 of the 2003 Act, as originally enacted. It therefore did not amount to a deprivation of possessions for the purposes of A1P1.
[86] There was no de facto deprivation of property in this case. Certain petitioners held tenancies. They continued to hold them after the Remedial Order entered into force, albeit that the tenancies became subject to certain different conditions. Even if the value of the tenancies was substantially reduced, they were not rendered worthless. Accordingly, there was no deprivation of property.
[87] If there was any adverse impact upon value, which is denied, that does not equate to a deprivation of possessions: Mellacher v Austria. Moreover, measures leading to a loss of property may nevertheless be regarded as a control of use, or at least as being so intimately tied to a control of use as to be covered by paragraph two of A1P1: Handyside v United Kingdom (1979-80) 1 EHRR 737.
Proportionality
[88] In assessing whether the interference was justified, it did not matter that another way of balancing the interests could be struck. The process discussed earlier had to be gone through in terms of the 2001 Act: consultation, hearings before committees, response by the Scottish Ministers to points made, the taking into account of reports, and the final approval of the Scottish Parliament. What was required therefore was to balance the various interests in this socio-economic context where there was a wide margin of appreciation and no test of strict necessity. The process in relation to the Remedial Order involved the cooperation of the executive and the legislature to put right the defect in the earlier legislation. This scrutiny, as seen in Wilson v First County Trust Ltd (No 2), was relevant to the balancing process – it bolstered the judgement that was made.
[89] Involvement of the State and the absence of third-party interests were relevant considerations in relation to proportionality of the interference. The question of compensation in the present case was just one element in the exercise and in the analysis of whether or not an unfair and excessive burden has been borne by any of the petitioners. The Remedial Order did not effect retroactive change.
[90] The cases cited by the petitioners did not support the view that no fair balance had been struck in the present case. In assessing whether this requirement is met, the European Court of Human Rights has indicated that the State enjoys a wide margin of appreciation: Gasus Dosier v Netherlands (1995) 20 EHRR 403. The proportionality test which is applied in A1P1 cases does not involve a test of strict necessity: James v United Kingdom. It is essential to allow the legislature a margin of appreciation if a devolved system is to work: Bank Mellat v HM Treasury. Contrary to the petitioners’ assertion in their Note of Argument, the right to peaceful enjoyment of possessions is, of all the Convention rights, one of the most heavily qualified. The possible existence of alternative courses of action will not, of itself, render an interference unjustified: Bäck v Finland (2005) 40 EHRR 48.
[91] A number of considerations were relevant to the assessment of fair balance in this case. Prior to the 2003 Act, a general partner had no expectation that he would obtain a secure 1991 Act tenancy. He did not pay to acquire it. Had section 73 applied to the landlord, the tenancy would have ended in terms of the dissolution notice, subject only to the run-off period provided for by section 73. The opportunity to seek a secure 1991 Act tenancy was a windfall obtained at the landlord’s expense. The tenants have held the tenancies for a relatively short period of time. Any rights obtained as a consequence of the operation of such provisions were vulnerable to challenge at the landlords’ hands at any time. In light of the judgment of the Supreme Court in Salveson v Riddell, the respondents were obliged to take remedial action, because of the violation of the landlords’ rights. The Remedial Order places the general partners in a better position than they would have been in had the 2003 Act’s provisions not been enacted as they were, in violation of the rights of the landlords. The Remedial Order was prepared in consultation with a wide variety of interest groups. The solutions adopted by the Remedial Order were within the margin of appreciation afforded to the respondents and the Scottish Parliament in such matters of social and economic policy. The respondents and the Scottish Parliament required to have regard to the ongoing relationships between tenants and landlords, and the need to promote a vibrant agricultural sector. The Remedial Order re-balances the contractual relationship between landlord and tenant in light of the judgment in Salvesen v Riddell.
[92] The alleged breach of A1P1 is centred upon the fact that it does not provide for payment of compensation. Absence of compensation will ordinarily indicate a violation of A1P1 where there has been a deprivation of property. However, there is no general rule that interference with peaceful enjoyment of possessions requires the payment of compensation. Control of use does not in general give rise to a right to compensation: Karamitrov v Bulgaria, App No 53321/99, 10 January 2008. It may often be justified without it: J A Pye (Oxford) Limited v United Kingdom (2008) 46 EHRR 45; Sinclair Collis Limited v Lord Advocate 2011 SLT 620. The provision of compensation is a factor to be taken into account in the assessment of proportionality/fair balance. Compensation is not a prerequisite of proportionality. Whether (and if so, to what extent) compensation should be provided is normally a matter for the discretionary area of judgment of the legislature: Adams v Advocate General 2003 SC 171; Adams v Scottish Ministers 2004 SC 665. The margin of discretion is a wide one: J A Pye (Oxford) Ltd v United Kingdom; AXA General Insurance Ltd, Petrs (IH) 2011 SLT 439; R v Secretary of State for Health, Ex parte Eastside Cheese Co [1999] 3 CMLR 123.
[93] Cases such as Klibaviciene v Lithuania and Stretch v United Kingdom do not raise the difficult and delicate issues of balancing competing private interests which arise in the instant case. It may generally be that errors made by the State should serve to the benefit of persons affected where no other competing private interests are at stake. Where such competing interests are at stake, the State must take them into account in considering the question of fair balance: Trgo v Croatia.
[94] The Remedial Order could not in any event make provision for compensation for the particular circumstances of persons unknown to the respondents.
[95] The Remedial Order was proportionate and struck a fair balance. There was no obligation on the respondents to make compensation available, and in particular no obligation to do so within the confines of the Remedial Order.
Reply for the Petitioners
[96] The question is whether the Remedial Order as it stands strikes the appropriate balance. It was the petitioner’s understanding that this question of principle would be determined first and so the petitioners’ claims had not been adjusted. Accordingly the petitioners were surprised about the detailed contentions made by the respondents in relation to the pleadings.
[97] The petitioners have different property interests. The family members resided in the dwellinghouse. There could be circumstances where more persons than the general partners have rights. The position of family farming businesses in Scotland was simply how farms work and this was known to the Scottish Ministers.
[98] As a generality one person can hold the tenancy but the family farming operation is effectively the tenant - it may have no legal right to the tenancy but it uses the land with the permission of the tenant. Commonly the family farming partnership will pay for the improvements and the value will be reflected in the partnership accounts.
[99] It may be that the original limited partnerships have gone. But the limited partnerships undertook investments and financial outlays which they are entitled to recover. It was the limited partnership which originally had the tenancy to which was “superadded” the section 72 rights. In some cases it doesn’t matter whether the tenant was the limited partnership or the general partner because the family farming business, often a partnership, would actually run the farm. The fundamental point at this stage was whether a fair balance had been struck – until that was resolved detail as to the claims could wait.
Decision and Reasons
The Petitioners’ Averments
[100] The petitioners place substantial emphasis on the existence of a legitimate expectation based upon section 72(10) of the 2003 Act. For example, the petitioners’ first plea in law is in the following terms:
“In the circumstances condescended upon the Petitioners having relied upon their legitimate expectation that following the passing of section 72(10) of the 2003 Act that in due course they would acquire a secure 1991 Act tenancy, and having sustained loss, injury and damage thereby, they are entitled to compensation therefor.”
[101] The petition also contains various averments about reliance by the petitioners upon section 72(10). For example, in Statement 4(a) it is averred that:
“…the passing of section 72 and in particular section 72(10) of the 2003 Act, where notices terminating their limited partnerships had been served during the “relevant period”, gave the Petitioners a legitimate expectation that they would, on a balance of probabilities, obtain a secure Agricultural Holdings (Scotland) Act 1991 (the 1991 Act) tenancy of their holding when they came to serve a section 72(6) notice on their landlord. The farming business of themselves and their family farming partnerships and as individuals depended upon said tenancy. As condescended upon in the Appendix “Petitioners’ Details” (based on Appendix 1 in each of the Henderson Claims) hereto, the petitioners, in the period between the passing of the section and the service of the section 76(6) [sic] notices, acted in reliance on the expectation that they would after service of the said section 76(6) [sic] notices have a secure tenancy; e.g. they served such notices or some of them served rent review notices etc., which they would not have done but for the said rights in section 72 because each tenant was dependant on the goodwill of their landlord not to terminate the limited partnership and let it run on tacit relocation or if terminated to grant a new tenancy. The effect of such actions was to sour their relationships with their landlords and in consequence their tenancies have been or are being terminated, where had the section not been passed and the petitioners not so acted, in all probability they would either have been granted another lease such as a limited duration tenancy or their tenancies would have continued to run on tacit relocation. The unlawful passing of the said subsection, which was not within the competence of the Scottish Parliament, has caused the petitioners loss, injury and damage by their reliance on the said legitimate expectation as hereinafter set out in the Appendix.”
[102] In Statement 6(a) it is averred:
“That having acted in reliance on the legitimate expectation arising from the passing of section 72(10) of the 2003 Act to their prejudice and having sustained loss, injury and damage thereby, the Petitioners are entitled to compensation therefor. The passing of section 72 and in particular section 72(10) gave the Petitioners an Article 1 of the First Protocol property right in respect of the tenancy upon which the family farming business was dependant, which was also a property right under that Article, in respect of which they acted to their prejudice”.
[103] So, the first plea-in-law and these averments make clear that the principal type of legitimate expectation founded upon by the petitioners is argued to have arisen and to have been relied upon prior to the service of notice under section 72(6) and the acquisition of the secure 1991 Act tenancy. This expectation of all of the petitioners is therefore said to have existed at a time when the limited partnership was the tenant.
[104] In the petition, the petitioners make no clear and specific case that there were any actings in reliance upon actually having the secure 1991 Act tenancy, that is to say after service of the section 72(6) notices. In Statement 4(d) it is averred that
“Group 2 Petitioners have relied and acted since the passing of section 72 including section 72(10) of the 2003 Act, on the fact that they would in all probability acquire a section 1991 Act secure tenancy when they came to serve a section 72(6) notice and after they had acquired a secure 1991 Act tenancy”.
[105] This averment is not well-expressed and it is not at all clear what is being referred to by the words “after they had acquired a secure 1991 Act tenancy”. There are, for example, no averments of any of the petitioners having incurred particular expenditure because of reliance on having a secure 1991 Act tenancy after the tenancy had been acquired. I am therefore very doubtful as to whether any clear case is made in the petition that there were indeed actings in reliance upon having a secure tenancy after that tenancy had been obtained. However, I was not addressed on the contents of the claims made by the individual petitioners and, for aught yet seen, these may include claims said to arise from reasonable reliance during the period after acquisition of the tenancy. I shall proceed on the basis that this may form part of the petitioners’ case.
[106] As is noted above, the petitioners also aver that the service of the section 72(6) notices damaged the relationship with the landlords. The petitioners further aver that it was not until well after the decision of the Inner House in Salveson v Riddell that they knew that their rights were subject to challenge by the landlord.
Victim Status
[107] Section 7(7) of the Human Rights Act 1998 provides that a person is to be regarded as a victim of an unlawful act under the statute only if he would be a victim for the purposes of Article 34 of the Convention if proceedings were brought in the European Court of Human Rights in respect of that act. The same test is applied by section 100(1) of the Scotland Act 1998. In terms of Article 34 of the Convention, the Court “may receive applications from any person, non-governmental organisation or group of individuals claiming to be the victim of a violation” of a substantive ECHR guarantee by the State.
[108] The term ‘victim’ is not restricted to persons who can establish that their rights have actually been violated. A person who establishes a reasonable likelihood that his or her rights have been violated can be treated as a victim.
[109] In some cases an issue as to victim status has arisen where, for example, the petitioner is not immediately affected but belongs to a class of persons who risk being affected by the measure (e.g. AXA General Insurance v Lord Advocate [2012] 1 AC 868; Marckx v Belgium (1979) 2 EHRR 330).
[110] However, an adverse impact on a financial interest, resulting from the direct effect of a measure on the property rights or possessions of another person, does not suffice for the purposes of establishing victim status in relation to A1P1. The petitioners did not seek to persuade me that the concept of victim status for the purposes of A1P1 has been extended to include indirect victims or potential victims. The petitioners did not point to any case, whether from the Strasbourg court or a domestic court, which supports the proposition that a violation of the property rights of A could give victim status to B. Rather, the petitioners’ position on victim status was that they had all been directly affected, in respect that their possessions had been the subject of interference.
[111] It is of course necessary to consider the terms of the measure complained of and whether it directly affects the petitioners’ rights. It must also be borne in mind that the Convention is concerned with the reality of a situation rather than its formal appearance, in order to ensure that it guarantees rights that are practical and effective. The interpretation of the concept of ‘victim’ is correspondingly broad.
[112] In the present case, the Remedial Order was directed at changing the relative rights of landlords and the general partners (in the former limited partnerships) who had now become tenants of the landlords. The persons directly affected were the general partners. Had I been considering the question of victim status based simply on the nature and terms of the measure complained of, my view would be that it cannot be said to have directly affected the rights of persons who were not general partners.
[113] In relation to section 72(10) of the 2003 Act, the person who possessed the tenancy when the Act came into force was the limited partnership, but its tenancy was not directly affected by the Act or by the Remedial Order – the tenancy was ended in terms of the contract of lease.
[114] However, as discussed above, the petitioners’ case proceeds on the basis that each and all of them have had their possessions interfered with. It is therefore necessary to consider whether a recognised possession exists in respect of each petitioner. If such a right exists, the next step will be to consider whether there has been an interference with the right, and if so, the particular nature of this interference, before turning to consider whether there has been a violation of A1P1.
Possessions
[115] Each petitioner has to identify an existing possession or a property right of his own which has been the subject of interference: X, Y and Z v Germany; Inze v Austria. It was not suggested by the petitioners that any statutory right was itself a possession for the purposes of A1P1.
THE TENANCY
[116] It is clear, and indeed was not the subject of dispute in submissions, that the tenancy held by a general partner who had acquired it by virtue of serving a notice in terms of section 72(6) was a possession of the general partner for the purposes of A1P1.
[117] As is noted above, the petitioners averred that section 72(10) of the 2003 Act “gave the Petitioners a legitimate expectation that they would, on a balance of probabilities, obtain a secure Agricultural Holding (Scotland) Act 1991 (the 1991 Act) tenancy of their holding when they came to serve a section 72(6) notice on their landlord”.
[118] This averment proceeds upon the basis that each and all of the petitioners would obtain a tenancy “of their holding”. However, as is explained above, under the legislation only those petitioners who at the material time were general partners in limited partnerships could serve a section 72(6) notice and thus obtain a secure 1991 Act tenancy. The other petitioners were simply never in a position to obtain such a tenancy. The argument based on this averment is patently untenable. No petitioners other than the general partners can claim, based upon section 72(6), that the tenancy was one of their possessions.
THE “FAMILY FARMING BUSINESS”
[119] The petitioners argued that “the family farming business”, which was said to be dependent upon the tenancy, was a possession of each of the petitioners.
[120] There are a number of problems with this contention. The legal nature of the family farming business for the various sets of petitioners was not the subject of averment nor was it explained in submissions. There was no specification of whether that business comprised the separate entity of a partnership (or a limited partnership) or took some other legal form. Indeed, if the contention that the family farming business was a possession of each petitioner is correct, then, for reasons which were entirely unexplained, the general partner, family members and either a partnership or a limited partnership (or in some cases both) in each set of petitioners all had economic interests in the business. But the specific interest of each of the individual natural or legal persons in the family farming business was simply not identified or explained. There was no attempt to link the key actual possession in issue (the tenancy) with the family farming business, for example as a possession of that business rather than as a possession of the general partner.
[121] In short, the use of the vague and general expression of “family farming business”, to seek to show the existence of a property interest or possession of each and all of the petitioners, is meaningless. It does not assist in identifying possessions for the purposes of A1P1 which have been the subject of interference.
[122] The petitioners’ contention in reliance on Öneryildiz v Turkey (that it involved the recognition that other people, family members, can have relevant claims) is misconceived. In that case, the State had actually acknowledged the existence of a proprietary interest on the part of the applicant and other family members. The context was a claim in relation to Article 2. The case simply does not support the extension of the concept of possessions for the purposes of A1P1 to allow relatives of the general partner, or associated legal persons, to claim a proprietary interest in the tenancy or to claim that the family farming business is a possession.
[123] The submissions made by the petitioners about the farming business carried on in respect of the lease of an agricultural holding being a possession for the purposes of A1P1 relied upon Lancashire County Council v Taylor. That case makes clear (at para 57) that the business interest ended at the time when the tenancy came to an end. While the goodwill of the business was a possession of the tenant, the business was not itself a possession, separate from the tenancy, for the purposes of A1P1. In Tre Traktörer Aktiebolag v Sweden, also relied upon by the petitioners, the economic interests connected with the running of restaurants were held to be possessions. Removal of a licence was an interference with possessions. The economic interests were, however, those of the applicant company which ran the restaurant and which held the licence, the maintenance of which was one of the principal conditions for the carrying on of the applicant company’s business. The case does not assist with the petitioners’ contention that the family farming business is a possession.
[124] Reliance was also placed upon Adams v Advocate General, which involved the loss of opportunity to pursue an activity. The interference in that case (a ban on fox hunting) prevented the petitioner from carrying out his activities at all. This issue simply doesn’t arise in the present case – no petitioner avers that he was prevented from carrying on his activities.
[125] The petitioners argued that Lallement v France was analogous to the present case. However, in Lallement it was not disputed that there had been expropriation of part of the applicant’s farm land and he had been offered compensation which he did not accept, because it did not adequately compensate him for loss of what was described as his “working tool”. There had plainly been a deprivation of property and the issue was simply whether the amount of compensation offered was appropriate. This case provides no support for the petitioners’ contention that “the family farming business” constitutes a possession.
[126] Accordingly, it has not been established that “the family farming business” is a possession of the petitioners for the purposes of A1P1.
LEGITIMATE EXPECTATIONS
[127] The petitioners argued that each of them, including those among their number who were not general partners, had a legitimate expectation of benefiting from the tenancy. The concept of possessions for the purposes of A1P1, it was said, was not limited to existing possessions but included those which a person had a legitimate expectation of acquiring. The petitioners also argued that the legitimate expectation of succession was a property right of the family member who would succeed to the property.
[128] Under the Strasbourg jurisprudence a legitimate expectation has no independent existence. It must be attached to a proprietary interest which must itself be sufficiently established: Kopecký v Slovakia. In that case, the court explained the notion of legitimate expectation in the context of A1P1. Reference was made by the court to Pine Valley Developments Ltd v Ireland where it had been held that a legitimate expectation arose when outline planning permission had been granted. The planning permission was found to be “a component part of the applicant companies’ property”. The court also referred to Stretch v United Kingdom, in which the applicant had to be regarded as having at least a legitimate expectation of exercising the option to renew a lease and this had to be regarded, for the purposes of A1P1, as “attached to the property rights granted to him… under the lease”. As the court explained in Kopecký, in this class of case the legitimate expectation is based on a reasonably justified reliance on a legal act which has a sound legal basis and which bears on property rights of the applicant.
[129] The court in Kopecký also referred to the case of Pressos Compania Naviera SA v Belgium, which illustrated another aspect of the notion of legitimate expectation. In that case the court did not expressly state that the legitimate expectation was a component of, or attached to, a property right as it had done in Pine Valley Developments Ltd and was to do in Stretch v United Kingdom. However, in Pressos the legitimate expectation was based upon an asset. No such expectation could come into play in the absence of an asset falling within the ambit of A1P1. The legitimate expectation identified in Pressos was not in itself constitutive of a proprietary interest. The court in Kopecký also noted that in a line of cases it had found that the applicants did not have a legitimate expectation where it could not be said that they had a currently enforceable claim that was sufficiently established.
[130] In accordance with that reasoning, in Trgo v Croatia, it was said (at para 44), under reference to Kopecký, that “a legitimate expectation has no independent existence; it must be attached to a proprietary interest which must itself be sufficiently established”.
[131] Accordingly, where there is no settled basis for a claim to a proprietary interest, there can be no legitimate expectation. The legitimate expectation itself cannot constitute the proprietary interest for the purpose of A1P1.
[132] The petitioners argue that there was a legitimate expectation of obtaining the right under section 72(6) to acquire a secure 1991 Act tenancy. However, that legitimate expectation was not attached to a property right of any of the petitioners.
[133] In relation to succession, a legitimate expectation of succession is not a property right of the other family member, nor is it attached to a property right of that person.
[134] Having regard to the guidance in the authorities, the petitioners’ contentions as to the existence of any possession for the purposes of A1P1 based upon a legitimate expectation are therefore without foundation.
[135] As noted above, one of the acts averred by the petitioners to have occurred in reliance upon what was said to be a legitimate expectation was the service by each general partner of a notice under section 72(6). The petitioners aver that this act was one of the events that soured relations between tenant and landlord. However, service of such a notice was of course a necessary precursor to obtaining the secure 1991 Act tenancy in the first place and it was also a voluntary act by the general partners. It was not an option they required to exercise. Accordingly, quite apart from the fact that there was no legitimate expectation in the absence of a property right, the alleged consequences (souring of relations between tenant and landlord) of service of a section 72(6) notice cannot be laid at the door of the respondents.
The position of individual Petitioners
GENERAL PARTNERS
[136] As I have indicated above, it is not disputed that the tenancy could qualify as a possession of the general partners among the petitioners. However, the respondents took issue with whether or not a number of the general partners who served notices under section 72(6) did indeed acquire the rights to a tenancy (for example, it was argued that in some cases the notices were invalid). The issues raised were not the subject of a detailed response by the petitioners and these matters will require to be dealt with in any further procedure in this case. Accordingly, the conclusions which I have reached in relation to interference with possessions of the general partners is subject to the caveat that it assumes that these general partners validly obtained the right to the tenancies and so qualify as having held possessions and that they were affected by the Remedial Order. I shall therefore refer to those whose possessions have been interfered with as “the qualifying general partners”.
[137] There is a separate issue which concerns the fifth, sixth and seventh sets of petitioners. The question is whether, having served notices under section 72(6), they became tenants, even though the landlords lodged applications for orders under section 72(8). The answer to this question is a matter of construction of the relevant provisions.
[138] Section 72(3) of the 2003 Act provides inter alia that where the tenancy purports to be terminated as a consequence of the dissolution of the limited partnership by a notice served on or after 16 September 2002 by a limited partner, “subsection (6) applies subject to subsection (4)”. Section 72(6) is in the following terms:
“(6) Where this subsection applies, notwithstanding the purported termination of the tenancy-
(a) The tenancy continues to have effect; and
(b) Any general partner becomes the tenant (or a joint tenant) under the tenancy in the partner’s own right
if the general partner gives notice to the landlord within 28 days of the purported termination of the tenancy or within 28 days of the coming into force of this section (whichever is the later) stating that the partner intends to become the tenant (or the joint tenant) under the tenancy in the partner’s own right.”
[139] Section 72(4) provides that subsection (6) does not apply inter alia if the Land Court makes an order under subsection (8). Section 72(7) (now repealed) applied where ”a tenancy continues to have effect by virtue of subsection (6)” and provided that the landlord could, in certain circumstances, including where the notice of dissolution of the partnership was served on or before 30 June 2003, apply to the Land Court for an order under subsection (8).
[140] Section 72(8) (also now repealed) provided that
“An order under this subsection-
(a) is an order that subsection (6) does not apply; and
(b) has the effect as if that subsection never applied.”
[141] As was made clear by section 72(7), it was where a tenancy continued to have effect by virtue of subsection (6) that an application could be made for an order under subsection (8). It seems to me to be clear from that provision that unless and until an order was made under subsection (8) (at which point the right of the general partner to continue as tenant would be deemed never to have existed), the general partner was the tenant of the tenancy which continued to have effect by virtue of subsection (6).
[142] Accordingly, the qualifying general partner petitioners in the fifth, sixth and seventh sets of petitioners do not require to rely upon the doctrine of loss of chance, or the argument that they had only a claim to a tenancy. Having served notices under section 72(6), they were, until an order of the Land Court was made under subsection (8), or until the tenancies came to an end as a result of the provisions of the Remedial Order, the tenants.
LIMITED PARTNERSHIPS
[143] No link between the limited partnership petitioners and the right to the tenancy given by section 72(6) to the general partners was identified either on averment or in submissions. The suggestion that the limited partnership petitioners had some form of legitimate expectation based upon section 72(6) has no foundation, in view of the meaning of the concept of legitimate expectation in the Strasbourg jurisprudence.
[144] In any event, the limited partnerships, as the existing tenants, could not have a legitimate expectation of enjoying a property right because of section 72(6), as they would never enjoy that right. The property right only came into existence following the service of the notice by the general partner, who would then hold the right. Any acts ostensibly done by the limited partnership petitioners in reliance on that legitimate expectation are of no relevance for the purposes of A1P1: it is about interference with existing possessions and there was no interference with the possessions of the limited partnerships.
[145] Moreover, at an even more fundamental level, the limited partnership petitioners had all ceased to exist at a date prior to the hearing of this petition and so no claim by or on behalf of them can be made.
[146] For these reasons, the claims made by the limited partnership petitioners are irrelevant.
PARTNERSHIPS
[147] Some sets of petitioners include a partnership within their number. No link between the partnership petitioners and the right to the tenancy given by section 72(6) to the general partners was made. There is no basis for concluding that the partnership had some form of legitimate expectation based upon section 72(6), again in view of the meaning of the concept of legitimate expectation in the Strasbourg jurisprudence.
[148] In any event, the partnership had no rights under section 72(6), for the same reasons as noted above in respect of the limited partnerships.
[149] For these reasons, the claims made by the partnership petitioners are irrelevant.
SUCCESSORS
[150] As noted above, it was argued by the petitioners that if there was, for example, agreement between father and son that the son would succeed to the father’s tenancy, this would constitute a claim which would be an asset of the son for the purposes of A1P1. In my view, such an agreement cannot constitute a claim for the purposes of the Strasbourg jurisprudence. It simply does not meet the test expressed in Kopecký (para 52): there is no sufficient basis in national law for the proposition that an arrangement of this kind between father and son constitutes a currently enforceable claim that is sufficiently established. Moreover, in Marckz v Belgium (para 50) it was made clear that A1P1 “applies only to a person’s existing possessions and that it does not guarantee the right to acquire possessions whether on intestacy or through voluntary dispositions”.
OTHER PETITIONERS
[151] Other than the general and vague references to the “family farming business”, which I have rejected as a ground for any claim, nothing was put forward as to why the other natural persons in each set of petitioners has any relevant basis for their involvement in this process. Accordingly, the claims made by them are also irrelevant.
Conclusion on question of victim status and possessions
[152] For these reasons, the only natural or legal persons among the petitioners who can claim victim status and who had a possession which was capable of being interfered with by the Remedial Order were the qualifying general partners (or joint general partners) who had served a notice in terms of section 72(6).
Interference
[153] Once it has been established that a possession, for the purposes of A1P1, exists, the next question is whether there has been an interference with the possession and, if so, the nature of that interference. This involves considering, as Lord Reed explained in AXA General Insurance v Lord Advocate (para 108) whether, in particular, it constitutes a deprivation of the possession falling within the second rule in A1P1 or a control of use falling within the third rule. As Lord Reed went on to state:
“Given that the second and third rules are only particular instances of interference with the right guaranteed by the first rule, however, the importance of classification should not be exaggerated. Although, where an interference is categorised as falling under the second or third rule, the Strasbourg court will usually consider the question of justification under reference to the language of those specific provisions of A1P1, the test is in substance the same, however the interference has been classified”.
In that case, it was difficult to classify the interference as either a deprivation of possessions or a control of use. But, as Lord Reed held, the same issues as to justification arose.
[154] In the present case, the petitioners contend that the general partners have suffered a deprivation of property. At one level, it was said that as a result of the Remedial Order the tenancy had been lost and therefore there had been a deprivation of the tenancy. At another level, it was argued that the Remedial Order had removed an enhanced right to a secure tenancy resulting in a reduction in the value of the tenant’s holding. Such an adverse impact on the underlying value of the tenancy was said to be a deprivation of property rather than a control of use under A1P1. It was again contended that this was the reality of the situation.
[155] In order for a deprivation of property to occur, it must be definitive and involve an irrevocable expropriation or transfer of property rights. A de facto expropriation will suffice.
[156] Deprivation of property includes deprivation of contractual rights. One of the bundle of rights which formed the tenancy was the security of tenure given by a secure 1991 Act tenancy. But deprivation of one of the bundle of rights which relate to a property right is not the same as deprivation of the property right. Rather, it is a control of use.
[157] The Remedial Order did not deprive the general partners of their tenancies. It gave an option to the landlords. While it is the case that the landlords in respect of each of the tenancies involved in the present case have either exercised their rights under section 73 or obtained vacant possession as a result of decisions by the Land Court, and thus it might be argued that a deprivation of property was the actual result of the passing of the Remedial Order, that was not a stipulation or requirement of the Remedial Order.
[158] The landlords had served notices on 3 February 2003, terminating the limited partnerships, but had then found on the enactment of the 2003 Act that these notices were not only ineffectual but that the tenants could obtain a secure 1991 Act tenancy. Tenants such as the present petitioners did so, at various points in time. Once the Remedial Order was enacted, that position was fundamentally altered. The tenant still had his secure 1991 Act tenancy, but it was subject to termination by the double notice procedure under section 73, or by a decision of the Land Court. But the question of whether the tenancy would in fact be brought to an end following the enactment of the Remedial Order was a matter for the landlord (using section 73) or the Land Court (in cases which were before it). Thus, the general partners were not deprived of the tenancies by the terms of the Remedial Order. If they were deprived of anything, it was the enhanced security of tenure.
[159] So, the tenancies continued to be held after the Remedial Order entered into force, although subject to different conditions.
[160] It is therefore appropriate to regard the Remedial Order, which brought all tenants who had served section 72(6) notices into generally the same position, as a control of use of the tenancies rather than a deprivation of property.
[161] The petitioners contended that the loss of value of the tenancy constituted a deprivation of property. That contention is unsound. The general partners still had their property rights following the passing of the Remedial Order. The enactment of legislation which has the consequence of devaluing a property right, but does not cause the property right itself to disappear, does not amount to an expropriation: Sporrong and Lönnroth v Sweden (A/52) (1983) 5 EHRR 35.
Violation of A1P1 rights
[162] The next issue is whether this interference with the A1P1 rights of the qualifying general partners constitutes a violation. In order not to be a violation, the interference must be shown to meet the test of legal certainty and to be justified by the general or public interest. Further, there must be a reasonable degree of proportionality between the means selected and the end sought to be achieved. This latter question focuses upon the issue of whether a fair balance has been struck between individual and collective interests.
[163] In the present case, the respondents contend, and the petitioners do not dispute, that the Remedial Order meets the test of legal certainty and that it is justified by the general or public interest. Accordingly, the issue is one of proportionality.
PROPORTIONALITY
[164] In Bank Mellat v HM Treasury, Lord Reed explained the essential elements in an assessment of proportionality:
“74.… it is necessary to determine (1) whether the objective of the measure is sufficiently important to justify the limitation of a protected right, (2) whether the measure is rationally connected to the objective, (3) whether a less intrusive measure could have been used without unacceptably compromising the achievement of the objective, and (4) whether, balancing the severity of the measure’s effects on the rights of the persons to whom it applies against the importance of the objective, to the extent that the measure will contribute to its achievement, the former outweighs the latter… In essence, the question at step four is whether the impact of the rights infringement is disproportionate to the likely benefit of the impugned measure.
75. In relation to the third of these criteria, Dickson CJ made clear in R v Edwards Books and Art Ltd [1986] 2 SCR 713, 781-782 that the limitation of the protected right must be ‘one that it was reasonable for the legislature to impose’, and that the courts were ‘not called upon to substitute judicial opinions for legislative ones as to the place at which to draw a precise line’. This approach is unavoidable, if there is to be any real prospect of a limitation on rights being justified: as Blackmun J observed, a judge would be unimaginative indeed if he could not come up with something a little less drastic or a little less restrictive in almost any situation, and thereby enable himself to vote to strike legislation down (Illinois Elections Bd v Socialist Workers Party (1979) 440 US 173, 188-189); especially … if he is unaware of the relevant practicalities and indifferent to considerations of cost. To allow the legislature a margin of appreciation is also essential if a federal system such as that of Canada, or a devolved system such as that of the United Kingdom, is to work, since a strict application of a ‘least restrictive means’ test would allow only one legislative response to an objective that involved limiting a protected right”.
[165] It is not disputed by the petitioners that the first two elements in Lord Reed’s formulation are satisfied. The only respect in which the petitioners contend that the test of proportionality is not met is the absence of any provision in the Remedial Order for compensation and the subsequent refusal of the Scottish Ministers to meet their claims for compensation. In respect of the third element, the petitioners submitted that a less intrusive measure could have been used, by making provision for compensation. However, if that is the correct approach, then it could be said in almost every case that the absence of compensation results in a violation, because provision could have been made for compensation. In my opinion, the true relevance of compensation is in relation to the fourth element in Lord Reed’s formulation.
[166] Lord Reed also said in Bank Mellat (at para [69]) that:
“…the intensity with which the test is applied - that is to say, the degree of weight or respect given to the assessment of the primary decision-maker - depends on the context”.
He noted that in cases concerned with A1P1 the European Court of Human Rights has often asked whether the person concerned had to bear an individual and excessive burden, giving the example of James v United Kingdom. He added that the intensity of review varies considerably according to the right in issue and the context in which the question arises.
[167] As Lord Reed observed in AXA General Insurance v Lord Advocate, (at para 131, under reference to Brown v Stott [2003] 1 AC 681 at 703) a national court, while it does not accord the margin of appreciation recognised by the European court, “will give weight to the decisions of a representative legislature and a democratic government within the discretionary area of judgment accorded to those bodies.” Where the issue lies within the field of social or economic policy, that is relevant to a consideration of the intensity of the review.
[168] The giving of weight or respect to that discretionary area of judgment implies that such a judgment has been exercised. In this case, the question of whether or not to include within the Remedial Order a compensation scheme had been the subject of such a judgment - that much is clear from the Business and Regulatory Impact Assessment referred to above. A positive decision to enact the Order in a form which contained no scheme for compensation was taken. In light of the authorities as to respecting that discretionary area of judgment, that is a factor to which I must give weight in considering the issue of proportionality in respect of the Remedial Order.
[169] But the background to how the Order came to be enacted does not in my view show that any reasoned analysis, discussion or judgment that compensation would not be made available at all was made. Rather, the pointers within the documents which have been produced suggest that the view of the Scottish Ministers was that there may be valid claims for compensation and that, by implication, it would be left to the Scottish Ministers to deal with these. By way of example, the RACCE committee’s report noted (at para 36) the government’s position as being that compensation claims were being left to be dealt with under the existing law.
[170] For these reasons, I am of the view that even although the issue lies within the field of social or economic policy and that is of relevance in determining whether the Remedial Order itself can be impugned, I cannot give weight to a decision reached by the legislature not to include a scheme for compensation in the Order in deciding whether the separate and later decision by the Scottish Ministers not to meet the compensation claims strikes a fair balance.
[171] In a letter to the Convenor of the RACCE committee of the Scottish Parliament dated 5 December 2014 the Cabinet Secretary for Rural Affairs, Food and Environment said:
“The key issue has been the interaction between the mediation process and any claims for compensation against the Government, bearing in mind the financial and other rules with which Scottish Government must comply in order to assess whether a legal liability might arise. As I’m sure the Committee will appreciate, the Government must reserve the right to carry out its own assessment processes on any compensation claims, so that we can take a view of the risks we might face on the question of liability in each individual case – without which we would not be able to make any compensation payments in compliance with those rules.”
[172] In my opinion, in these circumstances it was within the area of discretion afforded to the legislature to leave the question of compensation to be determined by the “assessment processes” to be applied by the Scottish Ministers rather than to create a scheme for the assessment of compensation within the Remedial Order itself. I therefore conclude that the Remedial Order itself did not violate the A1P1 rights of any of the petitioners.
[173] The focus then shifts to the decision of the Scottish Ministers to refuse to meet the compensation claims advanced by the petitioners. Plainly, any assessment of the proportionality of that decision requires to be made in the context of the effect of the Remedial Order. I turn to consider the factors relevant to the issue of fair balance in relation to that decision.
[174] The petitioners placed reliance on the terms of the letter dated 5 December 2014 from the Cabinet Secretary, the record of the evidence given by government ministers to the RACCE committee and the committee’s report. It was argued that these documents contained representations made by the Scottish Ministers that compensation claims would be met.
[175] On a proper consideration of the relevant documents, it is clear that no representation that compensation would be payable was ever made. It may well be true that the RACCE committee wished it to be the case that compensation would be payable in appropriate cases, but that was simply never promised. Thus, these documents have no relevance to the question of whether a fair balance was struck.
[176] In relation to the question of striking a fair balance, it is relevant to consider the position prior to the enactment of the 2003 Act. In Bäck v Finland, in the context of proportionality, the court stated that neither the Convention nor the Protocols preclude the legislature from interfering with existing contracts. The court regarded it as significant in that case that the applicant had, at the time of entering into the contract in question, accepted the risk of financial loss. In the present case, at the time of entering into the limited partnership agreement the general partner had accepted the risk of it being brought to an end.
[177] As the petitioners submitted, the Strasbourg court has often stated that compensation terms are material to assessing whether a fair balance has been struck (see e.g. Draon v France). The taking of property without compensation is normally a disproportionate interference (see e.g. Pressos Compania Naviera SA v Belgium). But even in cases of deprivation of property, A1P1 does not guarantee a right to full compensation in all circumstances: James v United Kingdom, (para 54).
[178] A right to compensation is not inherent in cases of control of use: Karamitrov v Bulgaria (para 77). In J A Pye (Oxford) Limited v United Kingdom the court went as far as stating: “Further, in the cases in which a situation was analysed as a control of use, even though the applicant had lost possessions, no mention was made of a right to compensation” (para 79). Nonetheless, in a control of use case the absence of compensation may be an important factor relevant to the issue of fair balance (Clayton and Tomlinson, The Law of Human Rights, 2nd edit, para 18.130).
[179] The Strasbourg jurisprudence does not support the view that a mechanistic or formulaic approach based only upon the nature of the interference is always appropriate – it will depend on the particular facts and circumstances.
[180] Prior to the 2003 Act, the general partners were members of limited partnerships, which held the tenancies, under contracts which provided for termination. There was no security of tenure beyond the contractually agreed duration. For some general partners, the 2003 Act unlawfully, although through no fault of their own, gave them access to an enhanced security of tenure. For a period of some years, the general partner petitioners who opted to use the process of serving a notice under section 72(6) were placed in an advantageous position, because of an unlawful piece of legislation – they enjoyed several years of tenancy that they would not otherwise have had. The general partner petitioners did not give value or other consideration for the enhanced security of tenure. When the position was corrected by the Remedial Order, they were placed in the same position as other general partner tenants, but still at an advantageous position to that in which they had previously found themselves prior to the 2003 Act (as members of a limited partnership which held a tenancy that was to terminate).
[181] In my opinion, the general rule as to compensation for deprivation of property has much less force when what is being done is to rectify an unlawful piece of legislation from which the qualifying general partners had benefited for no consideration (cf R v Secretary of State for Health, ex p East side Cheese, at para 57, where the circumstances were sufficiently exceptional to displace the general rule). Accordingly, even if (against the view I have reached above) the effect of the Remedial Order could properly be characterised as a deprivation of property, the question of whether, in striking a fair balance, compensation is due depends upon careful consideration of the whole facts and circumstances. This has repeatedly been made clear in the Strasbourg jurisprudence and was stressed by Lord Reed in AXA General Insurance v Lord Advocate (para 128). The facts and circumstances of this case are exceptional and even if the effect of the Remedial Order is viewed as a deprivation of property, the striking of a fair balance does not, in my opinion, warrant or require payment of compensation reasonably related to the value of the tenancy.
[182] I was advised by the petitioners that, in the cases which were not dealt with in earlier court proceedings, all of the landlords opted in to the section 73 regime and issued termination notices in terms of section 73, following the coming into force of the Remedial Order. I was given no basis to conclude that they would not have taken that step in response to the issuing of notices under section 72(6), had they been able to do so. The landlords desired to bring the tenancies to an end by notices served on 3 February 2003 and, when the Remedial Order came into effect giving them rights of termination, they took up those rights and brought the tenancies to an end. In those circumstances, the only reasonable inference is that if section 72(10) had never been enacted the landlords would have brought the tenancies to end as soon as possible using the rights under section 73. Having regard to the dates of service of the notices under section 72(6), and the dates upon which the tenancies have been terminated or will terminate, it is plain (as I have noted above) that all of the general partners among the petitioners have enjoyed several more years of holding a tenancy than they would have enjoyed but for the enactment of section 72(10). In looking at the reality of the situation, and considering in appropriate detail the question of fair balance, this is an important factor to weigh in that balance.
[183] By way of example, in relation to the general partners in the seventh set of petitioners, proceedings on the application by the landlord for an order under section 72(8), in response to the section 72(6) notice issued by the general partners, were ongoing in the Land Court when the Remedial Order came into effect. So, in terms of Article 3(2) of the Remedial Order, the Land Court required to make an order disposing of the application in whatever manner it considered reasonable. In submissions to the Land Court, the landlord’s position was that but for the invalid legislation he would have served notice under section 73(4) within a few days of receipt of the general partner’s notice under section 72(6) and would have recovered possession by 28 November 2009 at the latest. It was argued that the tenants had enjoyed the tenancy for seven years longer than would otherwise have been the case. In fixing a date of termination of 28 November 2016, the Land Court had regard to what it described as “a lengthy extension already enjoyed by the tenant”.
[184] Accordingly, regard must also be had to the positive effect on the general partners of being placed in the advantageous position, by section 72(10), of the tenancy not being subject to termination in terms of section 73, until the Remedial Order came into effect.
[185] It will therefore be necessary to identify the extent of the benefit or advantage obtained by the qualifying general partners from the extended period of tenancy enjoyed by virtue of section 72(10) of the 2003 Act. The relevant period of extension will require to be the subject of further submissions, but it may have to be calculated by reference to the period between the date on which the landlord could have brought the tenancy to an end by virtue of section 73, had that right been available to him under the 2003 Act as originally enacted, and the date of actual termination. However the period is calculated, it is relevant to have regard to the benefits, such as income or profit, if any, obtained by the qualifying general partners in that period.
[186] The Strasbourg case law contains examples of the court, in deciding upon proportionality, having regard to the claims made by the applicants and the principles upon which compensation should be based. In James v United Kingdom, reference was made to what was described as “the standard of compensation”, meaning whether there was a right to full compensation or to a lower sum, and reference was also made to the “choice of compensation terms” open to the State (para 54). In Öneryilditz v Turkey it was submitted that the applicant could not claim to be a victim of violation of his A1P1 rights “as he had been awarded substantial compensation for pecuniary damage and had been able to acquire subsidised housing on very favourable terms”. The court rejected that contention, stating that even if the advantageous terms to a certain extent had redressed the effects of the impugned act “they could not be regarded as proper compensation for the damage sustained by the applicant”. Accordingly, the court was able to conclude that, balancing the advantages gained by the applicant against the disadvantages to him, compensation would still be due. In Draon v France, the State had made provision for compensation, but the court found it to be insufficient and concluded that the applicant had been made to bear an individual and excessive burden, with the result that his A1P1 rights had therefore been violated. Again, the court was able to reach a conclusion as to the sufficiency of the compensation. In Klibaviciene v Lithuania the court held that the reimbursement of the price of the property to the applicant could only partially redress the violation of her rights. Thus, in considering whether further compensation was due, the court considered whether the amount received was sufficient redress for the violation. In Lallement v France, the compensation offered to the applicant was held to be insufficient. As is clear, in cases such as these the court has had regard, in assessing whether a fair balance has been struck, to the appropriate standard or basis for compensation and to whether sums offered or received were sufficient.
[187] In Urbárska Obec Trenčianske Biskupice v Slovakia, App No 74258/01, the applicants (landowners) had been deprived of their land, which by statute was transferred to the tenants. The applicants had received other land in compensation, but claimed that it was of substantially lower value than the land which had been taken. The government contended that, in assessing the value to the applicants of the land taken from them, regard must be had to the sums which the applicants would have had to pay to the tenants in compensation for investments made by them in respect of the land. The court took the view that if the value of the land taken was increased as a result of the work and investment of the tenants, this was counterbalanced to a certain extent by the fact that the tenants were able to derive benefit from land that they did not own for a considerable period of time. The court was thereafter able to reach a view as to the appropriateness of the compensation offered and concluded that the value of the land transferred in compensation was substantially less than the value of the land taken from the applicants.
[188] In that case, the investments made by tenants and the counterbalancing effect of the benefits obtained by them were of some relevance to the issue of what compensation was due to the applicants as landowners. In my view, these factors are also relevant in a case such as the present albeit that it concerns compensation claims by tenants. Accordingly, as I have noted above, I recognise that the counterbalancing effect of the benefits obtained by the qualifying general partners requires to be taken into account. However, as I have not been addressed on the figures I am not at this stage able to reach a concluded view on the consequences of that counterbalancing effect.
[189] The parties suggested that I should decide the issue of principle, that is whether or not compensation is due. That question of principle cannot of course be determined unless it is clear either that no compensation is due or that some compensation is due. It is not possible in the present case to deal with that matter in the abstract. Rather, in the circumstances of this case, it seems to me that all that the court can reasonably do is to establish the principles upon which the scheme of compensation should have been based but to leave for further procedure the question of whether, applying those principles, the claims of the qualifying general partners give rise to compensable loss.
[190] In seeking to strike a fair balance, and in identifying the principles to be applied in respect of compensation, the Scottish Ministers would have been required to have regard to the various considerations I have noted above. These include the contractual background and the legislative changes and their effect, including the acquisition by the qualifying general partners of secure 1991 Act tenancies without giving value or consideration and the enjoyment by them of several years of tenancy beyond what would otherwise have been the termination date. The considerations would also include the fact that the qualifying general partner petitioners had, through no fault of their own, been placed in a position where they might have made expenditure in reasonable reliance upon the unlawfully given right, which they would not otherwise have made, and may also have suffered frustration and inconvenience. In Trgo v Croatia, it was held that “…the applicant, who reasonably relied on legislation, later on abrogated as unconstitutional, should not – in the absence of any damage to the rights of other persons – bear the consequences of the State’s own mistake in enacting such unconstitutional legislation” (para 67). In Klibaviciene v Lithuania the court held that the risk of any mistake made by the State authority must be borne by the State itself and that errors must not be remedied at the expense of individuals concerned (para 34). It is also correct that, as Lord Reed made clear in AXA General Insurance v Lord Advocate (at para 120), persons cannot expect their rights to remain unchanged throughout the period of, for example, ownership, and further that in the present case the rights of landlords were also involved and required to be respected. However, that does not in my view affect the conclusion that in principle, in circumstances such as the present, the State should compensate individuals for loss directly arising from reasonable reliance upon defective legislation passed by it, which was then remedied by further legislation which interfered with the individuals’ rights under A1P1.
[191] In relation to specific losses suffered as a direct result of reasonable reliance, these would of course require to be established. This is a matter for further submissions in this case but plainly the reliance requires to have been reasonable in all the circumstances. This will require the reliance to have occurred in the period after service of the section 72(6) notice but not to have occurred after it was known or ought to have been known that the landlord’s rights had been, or were likely to have been, infringed by the 2003 Act. The act in reliance must have been in reliance on having the secure 1991 Act tenancy (rather than being an act which would have occurred even if a tenancy subject to termination under section 73 had been held). In light of my decision above in relation to possessions, it is only such losses suffered as a result of reasonable reliance by the qualifying general partners which would fall within the principle. Loss must have been suffered. If, for example, a specific investment was made by a qualifying general partner in respect of which compensation has been or will be recovered from the landlord at waygoing, then plainly that must be taken into account.
[192] As I have noted above, in the petitioner’s averments there appears to be no claim made that specific losses have been suffered as a direct consequence of reasonable reliance on the actual possession by a qualifying general partner of a secure 1991 Act tenancy. But it may be that on a closer analysis such claims are made. Moreover, the qualifying general partner petitioners may well have suffered frustration and inconvenience. In that regard, their claims are put by the petitioners at £5,000 each, a figure which is marginally higher than the amounts the Strasbourg case law shows has been awarded in respect of such matters. The key complaint of each set of petitioners is that the Remedial Order permitted termination of the tenancy, without compensation. As the position was that, prior to the 2003 Act, the tenancy was coming to an end in any event in accordance with the contractual provisions freely entered into by the parties, the striking of a fair balance does not require compensation to be paid for any other consequences of termination of the tenancy.
[193] Moreover, as the tenancy was wrongfully and unlawfully put on a footing where it could not be ended by notice under section 73, in circumstances in which the qualifying general partners had given no value or consideration for that benefit, the striking of a fair balance does not require compensation to be paid in respect of the value of the tenancy.
[194] Accordingly, had the matter been the subject of detailed consideration by the Scottish Ministers they would have been correct to reject claims based on the consequences of termination of the tenancy (other than direct losses caused to qualifying general partners as a consequence of reasonable reliance by them in the circumstances described above) and claims based on the value of the tenancy. In short, the striking of a fair balance did not require the vast bulk, in monetary terms, of the petitioners’ claims to be met.
[195] Having regard to all of these factors, the principles which ought to have been established are that compensation would be paid in respect of specific losses directly caused to the qualifying general partners as a consequence of reasonable reliance by them upon having a secure 1991 Act tenancy and for frustration and inconvenience, subject to the counterbalancing effect of setting off the value of the benefits obtained by the qualifying general partners arising from the extended period of tenancy which was enjoyed. While I have concluded that there was no deprivation of property in this case, but rather that it involved a control of use, for the reasons discussed above the principles I have identified should have been applied, given the facts and circumstances of this case, whether the consequences of the Remedial Order amounted to a deprivation of property or a control of use.
[196] In view of the conclusion I have reached as to the principles upon which compensation should be based, and not having been addressed on the actual claims, I am obviously not able at this stage to decide whether the application of those principles will or will not give rise to a sum being due to the qualifying general partners. When that decision is reached it will also determine whether or not there has been a violation of the A1P1 rights of the qualifying general partner petitioners. I therefore reserve my judgement on that matter until the next stage in these proceedings.
[197] As was proposed by the parties, I shall put the case out by order to discuss the implications of the decisions I have reached for further procedure. In the meantime, I reserve all questions of expenses.