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BLAIR C NIMMO+GERARD A FRIAR JOINT LIQUIDATORS OF THE SCOTTISH COAL COMPANY LIMITED FOR DIRECTIONS


Submitted: 11 July 2013

OUTER HOUSE, COURT OF SESSION

[2013] CSOH 124

P416/13

OPINION OF LORD HODGE

in the Petition

BLAIR C NIMMO and GERARD A FRIAR, Joint Liquidators of The Scottish Coal Company Limited

Petitioners;

For Directions

________________

Petitioners: Sellar, QC; Govier; HBJ Gateley LLP

SEPA: Lake, QC; Brodies LLP

Local authorities: Howie QC, McColl; Ledingham Chalmers LLP

Lord Advocate: Sheldon; Scottish Government Legal Directorate

SNH: McIlvride; Harper Macleod LLP

11 July 2013

[1] On 29 April 2013 the court ordered the winding up of The Scottish Coal Company Ltd ("SCC") and appointed the noters as interim liquidators. They had been appointed on 19 April 2013 as provisional liquidators of SCC. At a meeting of creditors on 3 June 2013 they were appointed liquidators. In this application they seek directions from the court in relation to the performance of their duties.

[2] SCC carried on several businesses including the operation of open-cast mining on seven sites in Scotland. Those sites were (i) House of Water, East Ayrshire, (ii) Broken Cross, South Lanarkshire, (iii) Dalfad, East Ayrshire, (iv) Dunstonhill, East Ayrshire, (v) Mainshill, South Lanarkshire, (vi) St Ninians, Fife, and (vii) Blair House, Fife. The site at Blair House had been mothballed when the noters were appointed provisional liquidators. Since their appointment the petitioners have ceased the mining operations but continue pumping and securing the safety of the sites.

[3] The noters have sold several sites and parts of other sites to Hargreaves Surface Mining Ltd ("Hargreaves"). SCC has retained several disused open cast sites or parts of sites at Headlecross, Glentaggart, Spireslack, Powharnal/Dalfad, Dunstonhill, Blair House and Shiel. This application is concerned with those sites or parts of sites.

[4] Mining operations are subject to various statutory obligations to control land use, to protect the environment, habitats and birds and to ensure the safety of the public by fencing disused mines and quarries. Several of the statutory obligations have been enacted to implement directives of the European Union. The costs of complying with the statutory obligations are significant. The obligations include the protection of the environment from the discharge of polluted water from the sites and the obligations under planning legislation to restore the sites.

[5] The principal environmental dangers relate to the pollution of water courses and ground water by (i) rain water run off carrying chemicals and fuels used in the mining process, and minerals exposed by the removal of surface cover on excavation of the voids and (ii) discharges, including silt, from settlement ponds or lagoons. In this case the principal regulatory provisions were and are the Water Environment (Controlled Activities) (Scotland) Regulations 2005 (which is revoked subject to transitional provisions) and 2011 ("CAR") which protect the water environment and the Pollution Prevention and Control (Scotland) Regulations 2000 (now revoked) and 2012 ("PPC") for which the Scottish Environment Protection Agency ("SEPA") is responsible. Scottish Natural Heritage ("SNH") also was represented as it is concerned with a special protection area at Muirkirk and North Lowther uplands special protection area ("SPA") under Conservation (Natural Habitats etc.) Regulations 1994 in which SCC's former site at Powharnal is located.

[6] SCC granted the Bank of Scotland plc a first ranking floating charge over all of the assets comprised in its property and undertaking. SCC's directors applied for the company to be wound up rather than appoint an administrator because it was insolvent and did not wish the cost of performing its environmental obligations to use up the funds realised from the sale of its assets. Before the sale to Hargreaves the noters had been spending about £1.4 million per month on maintaining the retained sites in conformity with the environmental authorisations that govern their use. The noters estimate that the sale to Hargreaves and future realisations will give them funds of between £9.7 million and £10.5 million. They calculate that they will spend about £478,000 per month on maintaining the sites that remain in their control. Thus if no other charges were incurred, the noters would have funds to maintain the sites for between 20 and 22 months.

[7] The noters wish to protect SCC's unsecured creditors and the bank, as holder of the floating charge, from the dissipation of the proceeds of disposal of SCC's assets which continued performance of the statutory obligations will entail. Mr Sellar estimated that the costs of restoring the sites and former sites in accordance with the planning conditions governing the sites and the planning agreements into which SCC had entered would be about £73 million. There is no question of SCC having the means to meet those planning obligations. The focus of the discussion therefore was on CAR and whether SCC's insolvent estate was liable to meet the costs of measures which SEPA would require to accept the surrender of its licences.

[8] The noters aver that the winding up of SCC creates a statutory trust over the company's assets in favour of its ordinary creditors and that they must apply the proceeds of the realisation of those assets ranking the unsecured creditors of the company pari passu. The noters assert that the continued expenditure on meeting SCC's environmental obligations would give a preference to the costs of performing those obligations which was contrary to the statutory pari passu ranking.

[9] The noters therefore seek directions from the court on:

(i) whether they can abandon or disclaim the sites and former sites, thereby transferring ownership to the Crown;

(ii) whether they can abandon or disclaim the statutory licences or permits which authorised SCC to carry out its industrial activities and which imposed the onerous statutory obligations on it;

(iii) the appropriate procedure to effect the abandonment of property under (i) and (ii) above; and

(iv) the ranking of the costs of complying with planning obligations or whether they are treated as liquidation expenses under Rule 4.67 of the Insolvency (Scotland) Rules 1986, and whether the noters are personally liable for any failure to comply with enforcement procedure under the Planning Acts.

[10] Because of the potential for serious environmental damage if the sites and former sites were not properly maintained and also significant financial costs which might fall on the taxpayer if the relevant local authorities or other statutory bodies had to carry out remediation works, the following public bodies or persons lodged answers to the note and were represented by counsel at the hearing:

The Scottish Environment Protection Agency ("SEPA"),

Scottish Natural Heritage ("SNH"),

East Ayrshire Council and South Lanarkshire Council ("the local authorities"), and

The Lord Advocate on behalf of the Scottish Ministers ("the Lord Advocate").

The application was intimated to, among others, Fife Council, Midlothian Council and North Lanarkshire Council and to the Crown Agent on behalf of the Office of Queen's and Lord Treasurer's Remembrancer. But those parties did not lodge answers or make representations at the hearing.

[11] As the noters and some of the respondents sought the directions as a matter of urgency, all of the represented parties prepared detailed written submissions and agreed a timetable for the hearing which restricted the time that each could make oral submissions. I am grateful to counsel for their industry and the skill with which they presented their written and oral submissions. Without that I would not have been able to give the directions within the desired time.

[12] Mr Howie for the local authorities raised an issue of the competency of the proceedings as he submitted that not all interested parties were represented at the hearing. He argued that the template for the application for directions was a petition by trustees for directions, which was competent only if all contradictors were before the court and the facts were not disputed (Peel's Trustees v Drummond 1936 SC 786).

I do not see the matter as one of competency. A liquidator as an officer of court has the right to apply to the court for directions which relate to his duties and are needed to allow him to perform those duties (Liquidator of Upper Clyde Shipbuilders Ltd 1975 SLT 39). The court will need to be satisfied that an interested party is aware of both the application and the hearing before it would give directions which could directly affect that party. But I do not think that it is necessary to go further and require that all interested parties attend or are represented at that hearing. To require that would involve a person in unnecessary expense and would give a veto to a party with an interest contrary to that of the general body of creditors.

[13] The immediate issue which causes the noters and SEPA to ask for an urgent determination is whether the noters can by disclaimer relieve themselves (and thus the creditors of SCC) of the cost of complying with their obligations under CAR. Mr Sellar accepted that there was no immediacy in relation to the fourth direction and agreed to hold that over for later discussion in order to allow the hearing on the other directions to be completed in the time available.

The first direction: the abandonment of land in Scotland

[14] There is no express statutory provision which allows the liquidator of a Scottish registered company to disclaim onerous property. This is in contrast with section 178 of the Insolvency Act 1986 ("the 1986 Act") which gives such a power to the liquidator of a company incorporated in England and Wales. Section 178 allows a liquidator by disclaimer to bring to an end the company's ownership of property, including land, which as a result vests in the Crown. Counsel were not able to find any case law or textbook which shows a liquidator of a Scottish company exercising a power to abandon heritable property. It was agreed that the principal issue raised in this application was without precedent in this jurisdiction.

[15] The only source of a liquidator's power to abandon is section 169(2) of the 1986 Act, which provides that

"In a winding up by the court in Scotland, the liquidator has (subject to the rules) the same powers as a trustee on a bankrupt estate."

Company legislation has adopted this method of formulating the powers of the liquidator of a Scottish company since 1862 (Companies Act 1862, section 171). Mr Sellar submitted that a trustee in sequestration had power to abandon land in order to protect the bankrupt's creditors from the cost of performing obligations in relation to the land and to achieve the efficient and prompt administration and distribution of the bankrupt estate. He submitted that if one read that power across to the regime for winding up registered companies in Scotland, it entailed a process similar to the disclaimer of onerous property in section 178 of the 1986 Act.

[16] It is necessary first to look to the powers of a trustee in sequestration and then analyse how section 169 transposes those powers in the context of a corporate insolvency.

[17] Section 31 of the Bankruptcy (Scotland) Act 1985 provides that the property of the bankrupt vests in the trustee at the date of sequestration. But that vesting does not mean that the trustee must take up all rights vested in him. The trustee can choose to decline to perform the obligations of the bankrupt under a contract leaving the counterparty with a claim for damages against the bankrupt estate for breach of contract. Similarly, the trustee can choose not to adopt a lease (Goudy, The Law of Bankruptcy in Scotland (4th ed.) pp.282-3) or shares in a company (Myles v Liquidators of the City of Glasgow Bank (1879) 6 R 718). He may choose not to deal with corporeal moveable property, such as a car or a TV set, or a plot of ground which he considers may be difficult or uneconomic to sell. He may also decline to take title to or carry out obligations in relation to heritable property which was held under a feudal title before the Abolition of Feudal Tenure (Scotland) Act 2000 ("the 2000 Act") abolished the feudal system of land tenure in Scotland (Goudy (above) p 282; Mitchell's Trustees v Pearson (1834) 12 S 322; Marquis of Abercorn v Grieve (1835) 14 S 168; and Mitchell's Trustee v Galloway's Trustees (1903) 5 F 612, Lord Adam at 617).

[18] Where a trustee decides not to adopt a contract or a lease or shares or to take up heritable property which had vested in him, the effect of that abandonment is to reverse the vesting under section 31 so that the right or property remains in the ownership of the bankrupt (Mitchell's Trustees v Pearson (above); Air v Royal Bank of Scotland (1885) 13 R 734; Whyte v Northern Heritable Securities Investment Co Ltd (1891) 18 R (HL) 37, Lord Watson at 39; Goudy (above) p 371; Bankruptcy (Scotland) Act 1985 section 32(9)(a)). This form of abandonment does not render the property ownerless or cause it to vest in the Crown. But it is all that is needed to free the trustee from liability in relation to the abandoned asset and to allow him to realise and distribute the remainder of the bankrupt's estate.

[19] It was submitted that the power of a trustee to decline to perform had a contractual basis and that the abolition of the feudal system of land tenure by the 2000 Act meant that a trustee could not abandon land. I disagree. Absent statutory provision to the contrary, I see no reason why the trustee should not decline to take title to land and indicate to the bankrupt that he does not intend to realise it in the sequestration. The trustee might do so either because the land was burdened by obligations or because there was no market for it. If the trustee makes clear that he is not taking up the land, the bankrupt would be free to deal with it. Such abandonment would not render the land ownerless. If the trustee did not register his title, the bankrupt throughout would retain the real right of ownership. What the trustee would abandon would be the right to administer and realise value from the land.

[20] The difficulty that arises from the statutory model by which the powers of a trustee in bankruptcy are given to the liquidator of a registered company is that the winding up order does not vest the company's property in the liquidator. Instead he is the manager of the company's property which remains vested in it (Smith v Lord Advocate 1978 SC 259, Lord President Emslie at 270-272). The liquidator can obtain a vesting order from the court under section 145 of the 1986 Act. But a liquidator very rarely does so. Because there is no automatic vesting, the noters proceed on the basis that the only way in which a liquidator can protect the funds, which he holds for the company's creditors, from onerous obligations relating to property is for him to bring to an end the company's ownership of that property. In other words the noters argue that the application by section 169 of the 1986 Act of the trustee's powers gives a liquidator of a Scottish company a power to disclaim ownership of property similar to that of the liquidator of a company registered in England under section 178 of the 1986 Act.

[21] The respondents submit that this is not possible in Scots law as there is no power to abandon the ownership of land and as ownerless land is an impossibility. This challenge raises two questions. First, can someone abandon the ownership of land in Scotland? Secondly, can there be ownerless land in our legal system?

[22] Counsel were not able to find any authority which supported the idea that an owner could abandon land in Scotland. At a time when the ownership of land has been become regulated in the public interest through planning and environmental legislation, it is easy to see why a unilateral power to abandon land could be abused if it existed. I note that in Roman Dutch law, with which Scots property law has strong affinities, it was possible to abandon land except where the sole purpose of the abandonment was to escape dues on the property (Van der Merwe and De Waal, The Law of Things and Servitudes (1993) para 205). The German Civil Code at section 928 has a procedure by which an owner of land can abandon it by tendering a declaration of relinquishment to the land register office. It appears that it is not impossible in principle in an essentially civilian property system for an owner to abandon land. But I have been shown no precedent for doing so in Scotland. Absent any authority, I consider that, by closest analogy, the Roman Dutch prohibition on abandonment to avoid obligations suggests that any abandonment by an owner, other than in the context of an insolvency regime, would have to be regulated by the courts.

[23] The respondents submitted that the statutory provisions relating to the transfer of land prohibited such relinquishment, if it existed at common law. I disagree. It was suggested that section 3 of the Land Registration (Scotland) Act 1979 ("the 1979 Act") made no provision for the registration of an abandonment of land. But section 2(4) of that Act provides:

"There shall also be registrable -

(c) any other transaction or event which (whether by itself or in conjunction with registration) is capable under any enactment or rule of law of affecting the title to a registered interest in land but which is not a transaction or event creating or affecting an overriding interest."

The respondents also referred to section 4 of the 2000 Act which provides:

"(1) Ownership of land shall pass -

(a) in a case where a transfer is registrable under section 2 of the Land registration (Scotland) Act 1979 (c. 33), on registration in the land register of Scotland;

(b) in any other case, on the recording of a conveyance of the land in the Register of Sasines".

But subsection (2) of section 4 provides:

"This section is without prejudice to any other enactment, or rule of law, by or under which ownership may pass."

Thus, if an owner has power to abandon land and in particular if the transposition of the powers of the trustee in sequestration to the corporate liquidation regime enables a liquidator to relinquish a company's ownership of property, section 4(2) of the 2000 Act and section 2(4) of the 1979 Act would allow that abandonment of ownership.

[24] I turn to the submission that there cannot be ownerless land in Scotland. Mr Sellar and counsel for the respondents appeared to agree that ownerless land was an impossibility. But the authorities to which they referred did not support that submission. Without a feudal system in which the Crown is the ultimate superior, ownerless land may result from the Crown's waiver of its prerogative right to bona vacantia. It appears that both at common law and under statute, the Crown can waive its ownership of bona vacantia. MacMillan, The Law of Bona Vacantia in Scotland (1936) suggests (pp.10-12) that the prerogative right is discretionary in its exercise and that the Crown can waive its entitlement in the public interest. I recognise that the institutional writers speak of abandoned property passing to the Crown and the Second Division applied the maxim quod nullius est fit domini regis in the St Ninian's Isle treasure case (Lord Advocate v University of Aberdeen and Budge 1963 SC 533, Lord Patrick at 553-554 and Lord Mackintosh at 558-559). I note also that section 58 of the 2000 Act preserved prerogative rights in relation to ownerless or unclaimed property. But if the Crown can disclaim ownership of such property, the prerogative by which it acquires land does not compel it to retain ownership of that land.

[25] Similarly, the statutory regime which governs the ownership of a company's assets after its dissolution (ss. 1012-1013 and 1020-1022 of the Companies Act 2006) allows the Crown to waive its right to such property. Section 1012(1) provides:

"When a company is dissolved, all property and rights whatsoever vested in or held on trust for the company immediately before its dissolution (including leasehold property, but not including property held by the company on trust for another person) are deemed to be bona vacantia and

(a) accordingly belong to the Crown ..., and

(b) vest and may be dealt with in the same manner as other bona vacantia accruing to the Crown ..."

I note the very broad definition of the property covered by section 1012. But that property may be disclaimed by the Crown under section 1013(1) which provides:

"Where property vests in the Crown under section 1012, the Crown's title to it under that section may be disclaimed by a notice signed by the Crown representative, that is to say ... in relation to property in Scotland, the Queen's and Lord Treasurer's Remembrancer."

This disclaimer does not revive the ownership of the company. Section 1020 provides:

"(1) The Crown's disclaimer operates to determine, as from the date of the disclaimer, the rights, interests and liabilities of the company, and the property of the company, in or in respect of the property disclaimed.

(2) It does not (except so far as is necessary for the purpose of releasing the company and its property from liability) affect the rights or liabilities of any other person."

Thus Parliament has provided for the property of a dissolved company which is disclaimed by the Crown to become ownerless. Mr Sellar submitted that the section needed to be read down so that it did not apply to land. He referred me to a short note concerning English law by D W Elliott (Land without an owner [1954] 70 LQR 26) in support of this proposition. It is not clear what was the policy behind the enactment of the prior provision in the Companies Act 1947. But effect has to be given to the words of the 2006 Act, which is consistent with the Crown's prerogative rights in relation to bona vacantia in Scotland. It appears to me therefore that Scots law does not exclude the possibility of ownerless land which can be acquired occupatione, by persuading the Keeper of the Registers to accept an a non domino disposition and possessing the subjects for the prescriptive period.

[26] In summary, I consider that it may be possible for an owner to abandon land and circumstances may arise when, on a disclaimer by the Crown, land becomes ownerless. I see no reason in principle why this should not be the case. If it is possible to abandon corporeal moveable property, it should be possible to abandon land. But in the absence of a statutory regime, it seems to me that the court should regulate such abandonment to prevent its abuse as a means of avoiding obligations.

[27] It is not clear to me that a liquidator needs in every case to disclaim the company's ownership of property in order to protect the funds available to its creditors from obligations which will diminish the insolvent estate. Like a trustee in sequestration a liquidator can choose not to adopt a contract and thus leave the counterparty to claim damages against the company by ranking in its liquidation (Asphaltic Limestone Concrete Co Ltd v Glasgow Corporation 1907 SC 463, Lord McLaren at 473; Joint Administrators of Rangers Football Club plc, Noters 2012 SLT 599 at paras 46 and 47). Similarly, a liquidator can abandon a lease, leaving the landlord with the remedy of damages against the insolvent company (Crown Estate Commissioners v Liquidators of Highland Engineering Ltd 1975 SLT 58). Such abandonment does not of itself bring the lease to an end because the landlord would first have to terminate it (P & O Property Holdings Ltd v City of Glasgow Council 2000 SLT 444, Lord Macfadyen at 448 I-J). In each case the liquidator declines to take up an asset and use the company's funds to meet obligations relating to the asset.

[28] I see no reason, in the absence of statutory constraints, why a liquidator should not be entitled to behave in the same way in relation to moveable or heritable property. He may choose which assets he uses if he carries on the company's business to achieve a better result for creditors in the winding up or which assets he wishes to realise to obtain funds. He may refuse to take up an asset and to use the patrimony, which is in his charge for the benefit of the company's creditors, to perform obligations relating to that asset. Just as a trustee in sequestration can decline to deal with an asset and avoid the accompanying responsibility, so also, it seems to me, can a liquidator by refusing to manage the asset and meet its related liabilities. Such a refusal would not terminate the company's ownership of the asset. The asset would remain the property of the company until the company was dissolved. But it would not form part of the liquidator's patrimony in the winding up. Instead it would remain in a mummified patrimony of the company as, in contrast to the bankrupt in sequestration, there would be no one with power to take control of the asset during the winding up. In relation to most claims which arise out of the ownership of property, the liquidator and the creditors' patrimony would be protected by the difficulty which a party would face in obtaining the court's authorisation to bring proceedings against the company (section 130(2) of the 1986 Act) and normal unwillingness of the court to make an order for specific performance against a company in liquidation.

[29] I do not think that this approach is excluded by section 144 of the 1986 Act which provides:

"(1) When a winding up order has been made, or where a provisional liquidator has been appointed, the liquidator or provisional liquidator (as the case may be) shall take into his custody or under his control all the property and things in action to which the company is or appears to be entitled.

(2) In a winding up by the court on Scotland, if and so long as there is no liquidator, all the property of the company is deemed to be in the custody of the court."

I think that section 144(1) is concerned with the liquidator getting control of the company's assets from its directors and employees and does not prevent a liquidator from declining to use the funds in the winding up in relation to an asset. A liquidator may therefore not have to terminate a company's ownership of an asset in order to avoid spending money on or in relation to it. But there may be circumstances in which the liquidator wishes to go further and cause the company to abandon its ownership of an asset.

[30] Before concluding my discussion of this direction, I consider the other arguments which counsel raised which focused on policy. First, I do not attach much weight to the view that a Scottish liquidator must have a power which is available to his English counterpart. While the similarity of the tasks which they perform in relation to companies which are part of a United Kingdom legislative regime suggests that liquidators should have similar powers, the law of winding up companies must allow for the very different rules of property law in the two jurisdictions.

[31] Secondly, I am not swayed by the possibility that the liquidator of an English company might be able to do something in relation to property in Scotland which the liquidator of a Scottish company could not. I do not need to decide the issue, which was argued briefly, whether the liquidator of an English company could invoke section 178 of the 1986 Act to disclaim land in Scotland as I consider that the first direction turns not on what the law should be but on what it is. And that turns on what a trustee in sequestration can do.

[32] Thirdly, and for similar reasons, I am not persuaded that the power of a liquidator to arrange for the dissolution of a company suggests that there is no need for a power to disclaim in order to achieve the prompt winding up of the company. The liquidator can arrange for such dissolution by applying to the court for early dissolution under section 204 of the 1986 Act or by holding a final meeting of creditors and giving notice of dissolution to the registrar of companies under sections 146 and 205 of that Act. But that does not mean that it is inexpedient for him to have a power similar to that of a trustee in sequestration to free the insolvent estate from the performance of continuing obligations. The fact that a winding up can be concluded without a power of disclaimer does not point to there being no power to disclaim.

[33] Fourthly, and again for similar reasons, I do not think that it is appropriate to attach weight to practical considerations such as the effect of a power to disclaim on the ability of environmental agencies to regulate land use which has the potential to harm the environment. The court is not in a position to make a judgement on the effect of a decision that there is a power to disclaim on the viability of commercial ventures if that were to cause the environmental and planning agencies to demand larger performance bonds or other financial security. Further, many of the consequences which the environmental agencies fear would occur on the dissolution of an insolvent company, whether or not its liquidator had a power to disclaim.

[34] I conclude, as a matter of generality, that a liquidator has a power to disclaim land either by declining to use the funds on the creditors' patrimony to deal with it or by taking steps to terminate the company's ownership of the land. But where the company's use of the land is governed by statutory permits, his ability to disclaim in either sense will depend upon the terms of the statutory provision and the permits. The noters' power to disclaim land in this case will therefore depend upon the correct answer to the question raised in the request for the second direction.

The second direction: the abandonment of a statutory licence or permit

[35] The Scottish Ministers made CAR under the Water Environment and Water Services (Scotland) Act 2003 and under section 2(2) of the European Communities Act 1972, in implementation of the United Kingdom's obligations under the framework directive for community action in the field of water policy (Directive 2000/60/EC). In its written submissions SEPA quoted from the recitals in various European instruments, which set out the policies of the European Union to prevent the pollution of water, and to protect ecosystems, habitats and biodiversity (Directives 2000/60/EC, 2008/105/EC and decision No 1600/2002/EC). SEPA also referred to recitals in Directive 2010/75/EU (Industrial Emissions (Integrated Pollution Prevention and Control) in relation to PPCR. It seems to me that while PPCR contains controls, it is sufficient to look to CAR 2011 to address the issues which the noters and respondents have raised.

[36] Under regulation 8 of CAR SEPA may grant a water use licence to authorise the carrying on of a controlled activity, which is defined in regulation 3. A controlled activity includes activities liable to cause pollution of the water environment, the discharge into groundwater of a pollutant, and any other activity which is likely to have a significant adverse impact on the water environment. Under regulation 10 SEPA can impose an authorisation if a person carries on a controlled activity without authorisation. A person who carries on, or permits others to carry on, a controlled activity without authorisation is guilty of a criminal offence (regulations 4 and 44).

[37] SEPA has powers of enforcement under regulation 31 and schedule 6. It may suspend or revoke an authorisation (regulation 29). Under regulation 32 SEPA may serve an enforcement notice if it is of the opinion that a person has carried out, is carrying out or is likely to carry out a controlled activity (i) in contravention of CAR, (ii) causing or being likely to cause significant adverse impact on the water environment; or (iii) causing or being likely to cause a discharge of a hazardous substance or other pollutant into groundwater (my summary). Under regulation 32(2) SEPA may serve the enforcement notice on the "responsible person or the operator". Under regulation 33 SEPA has power to carry out works where it considers that an enforcement notice should be served if it considers it necessary to do so forthwith or if it cannot find a person on whom to serve the notice. If SEPA carries out such works it can recover the cost of doing so from the responsible person or operator (regulation 33).

[38] CAR makes provision for the responsible person to apply to surrender an authorisation (regulation 27) and SEPA must determine the application within two months (regulation 28). Before it determines the application, SEPA must assess the steps, if any, needed to avoid a risk of adverse impact on the water environment. It may grant or refuse the application. It may specify in its notice of determination the necessary steps which it has identified to allow the responsible person to surrender the authorisation. An appeal lies to the Scottish Ministers against SEPA's determination and the conditions if any which it imposes on the surrender (regulation 50(h)).

[39] Significantly, CAR (regulation 2) defines "responsible person" as including the trustee in bankruptcy of a sequestrated responsible person and, if the responsible person is a company, a receiver, administrator or liquidator. Thus on insolvency, the insolvency practitioner who is charged with winding up the insolvent estate is made responsible for the observance of a water use licence and also for implementing the conditions of its surrender.

[40] The noters ask for directions whether they can disclaim such an authorisation. The respondents submitted that the noters could not because the authorisation was not property but was an immunity, which allowed the grantee to carry on activities which were otherwise prohibited. When the English courts have considered the relationship between the English liquidator's power to disclaim property under section 178 of the 1986 Act and a licence under the Environmental Protection Act 1990, they have held that such a licence was property for the purposes of the 1986 Act. I discuss those cases below in relation to another point. In reaching that view the judges have relied on, among other considerations, the broad definition of property for the purposes of the 1986 Act (unless the context otherwise requires) in section 436 of that Act which provides:

"'property' includes money, goods, things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to property."

While in this jurisdiction the court does not have to interpret the use of the word "property" in section 178, I am satisfied that it is not appropriate to seek an answer in what the common law of Scotland would define as property. Section 144, which I set out in para [29] above, gives the liquidator powers in relation to property as defined in the 1986 Act. In my view a water use licence is an interest "arising out of, or incidental to property" and so falls within the liquidator's control under section 144.

[41] In any event, in my view it is not critical to the issue between the parties that the water use licence be characterised as property. The issue is whether the liquidators can avoid the obligations which CAR imposes on a responsible person when they wind up SCC's insolvent estate.

[42] The leading English authority on the power of a liquidator to use section 178 of the 1986 Act to avoid the obligations of an environmental licence is the decision of the Court of Appeal in In re Celtic Extraction Ltd (in liquidation) [2001] 1 Ch 475. That case concerned a waste management licence under section 35 of the Environmental Protection Act 1990 ("the 1990 Act"). Such licence remained in force until it was revoked by the waste regulation authority or until its surrender was accepted (section 35(11)). The Court of Appeal held that a liquidator could use section 178 of the 1986 Act to disclaim the licence. A decision by that court on the interpretation of a United Kingdom statute is worthy of great respect in this jurisdiction, particularly by a judge at first instance. Further, the Appeal Committee of the House of Lords refused an application by the Environment Agency for leave to appeal.
[43] The reasoning of the Court of Appeal on the relationship between section 178 of the 1986 Act and the environmental legislation is set out in the judgment of Morritt LJ. He rejected the approach of Neuberger J in Re Mineral Resources Ltd [1999] 1 All ER, which concerned the same statutory provisions, that the environmental code in the 1990 Act and the insolvency code in the 1986 Act were inconsistent and that the former should prevail. The approach of the Court of Appeal turned on the wording of section 35(11) of the 1990 Act. It provides:

"A licence shall continue in force until it is revoked entirely by the waste regulation authority under section 38 below or ... its surrender is accepted under section 39 below."

Morritt LJ summarised the submissions before him on the interpretation of this provision thus:

"The wide one adopted by the judge so as to preclude any form of termination at all save those expressly mentioned and the narrow one, which save for those specifically mentioned, precludes termination by act of the parties but not by external statutory force. The official receiver contends that the court should adopt the narrower interpretation."

The court preferred the submissions of the official receiver. While recognising that the environmental legislation implemented a European Community directive, it held first that the principle in the directive that the "polluter pays" did not extend to require the unsecured creditors of an insolvent polluter to pay. Secondly, it was satisfied that a disclaimer would not involve an offence or breach of duty under the 1990 Act. Thirdly, while the duty and emergency powers of the waste regulation authority were limited to the period when the licence was in force, the same difficulties would arise on the dissolution of the company. Fourthly, there was a strong public policy requirement that the property of insolvents should be divided equally amongst their unsecured creditors. That supported a wide power of disclaimer and it required clear words to exclude the operation of section 178 of the 1986 Act (cf. section 36 of the Coal Industry Act 1994). Finally, in any event, if the waste management licence terminated on dissolution causing the problems which the Environment Agency wished to avoid, there was no reason to give section 35(11) the wide ranging effect for which it contended.

[44] This reasoning is powerful. Had it not been for Mr Sellar's fall-back submission relating to the devolved competence of the Scottish Ministers , there are a number of factors which would have persuaded me that it was not correct to apply the reasoning in Celtic Extraction to CAR.

[45] First, the provisions of CAR differ from those of section 35 of the 1990 Act. In particular CAR expressly imposes the surrender regime on insolvency practitioners in each of the available insolvency regimes (regulations 2 and 27). It is possible that, as Mr Sellar submitted, CAR could be interpreted as making insolvency practitioners holding the various offices responsible persons so long as they carried on operations but without prejudice to their power to disclaim both the land and water use licence. One can see this as an attractive approach to the interpretation of Part II of the 1990 Act in which the waste regulation authority grants a waste management licence to the person who is in occupation of the land. But, if other things had been equal, I consider the natural interpretation of the provisions in CAR is that the office holders in insolvency are constrained to use the surrender mechanism of regulation 27 to rid themselves of the obligations of the licence.

[46] Secondly, it seems to me that European Union law has been clarified, since Celtic Extraction was decided. Counsel referred the Court of Appeal to Marleasing SA v La Comercial Internacional de Alimentación SA (Case C-106/89) [1990] ECR I- 4135. The Court of Justice of the European Communities (6th Chamber) held that the obligation to take all appropriate measures to achieve the result envisaged by a directive was binding on all the authorities of Member States, including the courts. It stated (para 8):

"It follows that, in applying national law, whether the provisions in question were adopted before or after the directive, the national court called upon to interpret it is required to do so, so far as possible, in the light of the wording and the purpose of the directive in order to achieve the result pursued by the latter and thereby comply with the third paragraph of Article 189 EEC."

[47] Mr Lake for SEPA referred me to Pfeiffer v Deutsches Rotes Kreuz [2005] 1 CMLR 44. In that case, the Grand Chamber of the Court of Justice (at para 113) made the same point as the court had made in Marleasing:

"Thus, when it applies domestic law, and in particular legislative provisions specifically adopted for the purpose of implementing the requirements of a directive, the national court is bound to interpret national law, so far as possible, in the light of the wording and the purpose of the directive concerned in order to achieve the result sought by the directive and consequently comply with the third paragraph of Art 249 EC."

The court continued (at para 115):

"Although the principle that national law must be interpreted in conformity with Community law concerns chiefly domestic provisions enacted in order to implement the directive in question, it does not entail an interpretation merely of those provisions but requires the national court to consider national law as a whole in order to assess to what extent it may be applied so as not to produce a result contrary to that sought by the directive."

The court went on to make it clear that the courts of Member States had to use the interpretative methods recognised by their national law (para 116).

[48] Mr Lake also referred to Vodafone 2 v Revenue and Customs Commissioners [2010] Ch 77, in which Sir Andrew Morritt C accepted counsel's summary (paras 37 and 38) of the principles from European jurisprudence on the obligations of Member State courts to construe domestic legislation consistently with European law obligations. The text was this:

"In summary, the obligation on the English courts to construe domestic legislation consistently with Community law obligations is both broad and far‑reaching, In particular: (a) it is not constrained by conventional rules of construction (per Lord Oliver of Aylmerton in the Pickstone case, at p 126B; (b) it does not require ambiguity in the legislative language (per Lord Oliver in the Pickstone case, at p 126B and per Lord Nicholls of Birkenhead in Ghaidan's case, at paras 31 and 35; per Lord Steyn, at paras 48-49; per Lord Rodger of Earlsferry, at paras 110-115); (d) it permits departure from the strict and literal application of the words which the legislature has elected to use (per Lord Oliver in the Lister case, at p 557A; per Lord Nicholls in Ghaidan's case, at para 31); (e) it permits the implication of words necessary to comply with Community law obligations (per Lord Templeman in the Pickstone case, at pp 120H-121A; per Lord Oliver in the Litster case, at p 557A); and (f) the precise form of the words to be implied does not matter (per Lord Keith of Kinkel in the Pickstone case, at p 112D; per Lord Rodger in Ghaidan's case, at para 122; per Arden LJ in the IDT Card Services case, at para 114)."

"The only constraints on the broad and far‑reaching nature of the interpretative obligation are that: (a) the meaning should 'go with the grain of the legislation' and be compatible with the underlying thrust of the legislation being construed': see per Lord Nicholls in Ghaidan v Godin‑Mendoza [2004] 2 AC 557, para 33; Dyson LJ in Revenue and Customs Comrs v EB Central Services Ltd [2008] STC 2209, para 81. An interpretation should not be adopted which is inconsistent with a fundamental or cardinal feature of the legislation since this would cross the boundary between interpretation and amendment (see per Lord Nicholls, at para 33, Lord Rodger, at paras 110-113 in Ghaidan's case; per Arden LJ in R(IDT Card Services Ireland Ltd) v Customs and Excise Comrs [2006] STC 1252, paras 82 and 113); and (b) the exercise of the interpretative obligation cannot require the courts to make decisions for which they are not equipped or give rise to important practical repercussions which the court is not equipped to evaluate: see the Ghaidan, case per Lord Nicholls, at para 33; per Lord Rodger, at para 115; per Arden LJ in the IDT Card Services case, at para 113."

[49] It seems to me that this guidance may be unnecessarily sophisticated for the circumstances of this case. There is a broad interpretation of CAR, which the respondents favour, and a narrower interpretation advanced by the noters. Neither requires any departure from the conventional rules of statutory interpretation. I note also that the directive is a framework directive which gives a Member State considerable flexibility as to the mechanism that it adopts to implement the policies which it advances.

[50] But the broader interpretation would more effectively support the purpose of the directive. It would not promote the result sought by the directive if I were to give a narrow meaning to the responsibilities imposed on an officer in an insolvency so that he could bring those responsibilities to an end by disclaimer. While the court would expect an officer of court to behave responsibly, it is unlikely that such an officer would consider himself bound to delay a disclaimer for a significant time to allow an environmental agency to act. Significant delay beyond the time required for the officer to take control of the company's assets, understand the issues of the insolvency and work out a strategy for the realisation of those assets would be at the expense of the creditors of the insolvent in whose interests the officer is acting.

[51] Thirdly, (like Neuberger J in Re Mineral Resources at 757) I think that there is a strong public interest in the maintenance of a healthy environment, the remediation of pollution and the protection of biodiversity. There is a conflict between the results sought by the directive and the insolvency regime. I do not think that the insolvency regime has any primacy which means that CAR can exclude a liquidator's power to disclaim only if, like section 36 of the Coal Industry Act 1994, it says so expressly. The intention of the Scottish Ministers would have been beyond any doubt if they had removed a Scottish liquidator's power to disclaim and had provided that the expenses of surrender were an expense of the insolvency processes. But there would be scope for necessary implication, particularly in view of the results sought by the directive.

[52] Fourthly, I am not persuaded that the exclusion of a power to disclaim a water use licence directly offends the pari passu principle. The statutory obligations on a responsible person to comply with the licence and to arrange for its surrender on meeting conditions which SEPA consider necessary to protect the water environment are not obligations owed to SEPA. Performance of the obligations associated with the surrender of the licence would not be the same as meeting the debt of, say, a landlord by continuing to pay rent. In relation to a secondary remedy, it was not suggested that a failure of a responsible person to comply with the terms of the licence or the conditions upon which SEPA authorised its surrender gave rise to a liability on damages. SEPA's power under regulation 33 of CAR to carry out works and its entitlement to recover costs from the former operator may entitle it to rank in SCC's estate as a creditor. But that does not interfere with the pari passu principle.

[53] Fifthly, I do not think that the liquidation need be unduly extended by making the liquidators meet their statutory obligations as responsible persons. While the policy of the 1986 Act is that a liquidation should be completed within a reasonable time (Re Danka Business plc [2013] EWCA Civ 92, Patten LJ at paras 31 and 32), the nature of the obligations of the company and the liquidator are an important factor in what is practicable. In this case there is no question of spending money to maintain the status quo in the medium term until the money available to the liquidators runs out. No one would gain from that. The task of the liquidators would be to apply for the surrender of the licences in relation to the sites on which operations have ceased. The timetable for determination of an application to surrender in regulation 28 of CAR (para [38] above) prevents unnecessary delay, particularly when regulation 28(5) deems the application to be granted if SEPA fail to determine the application within the statutory period. The insolvency practitioner would be protected from unreasonable demands from SEPA by the appeals procedure of Part VIII of CAR and the ability to proceed by a written representations procedure which has strict time limits (Schedule 9, paras 20 - 25).

[54] Sixthly, I would not be persuaded to favour a narrow interpretation of CAR by the consideration that the problems which SEPA wishes to avoid might occur on dissolution. First, the liquidator's power to initiate a dissolution by summoning a final meeting of creditors depends on his being satisfied that "the winding up of the company is for practical purposes complete" (section 146(1) of the 1986 Act). He could not be so satisfied if he retained funds and had not complied with his obligations under CAR. The liquidator can adopt the alternative means of dissolution, by application to the court under section 204 of the 1986 Act, where he considers that the realisable assets of the company are insufficient to cover the expenses of the winding up. But the court is not likely to consider it appropriate to order dissolution if the liquidator has significant funds which could be used to obtain the surrender of the licences and any surplus paid to creditors.

[55] Accordingly, had other things been equal, there were powerful considerations which might have persuaded me that I should not follow the Celtic Extractions case but instead have reached a view which was closer to that of Neuberger J in Mineral Resources by holding that the liquidators could not disclaim but should seek to achieve the surrender of the licences by using the procedures in regulations 27 and 28 of CAR. I acknowledge the absence of any consideration in CAR of how the obligations it would impose in a winding up would relate to other obligations including the remuneration of the insolvency practitioners. Counsel also did not explain how, as a matter of practicality, insolvency practitioners would be funded to act as trustees, receivers, administrators or liquidators in insolvencies involving CAR. However those considerations would not be enough by themselves to persuade me to adopt a narrow interpretation of the relevant provisions.

[56] But CAR is delegated legislation by the Scottish Ministers. Section 101 of the Scotland Act 1998 ("the 1998 Act") provides;

"(1) This section applies to -

(a) any provision of an Act of the Scottish Parliament, or a Bill for such an Act, and

(b) any provision of subordinate legislation made, confirmed or approved, or purporting to be made, confirmed or approved, by a member of the Scottish Government,

which could be read in such a way as to be outside competence.

(2) Such provision is to be read as narrowly as is required for it to be within competence, if such reading is possible, and is to have effect accordingly."

This enjoins the court to seek an interpretation of subordinate legislation which is within the powers conferred by the 1998 Act.

[57] Section 54 of the 1998 Act provides:

"(1) References in this Act to the exercise of a function being within or outside devolved competence are to be read in accordance with this section.

(2) It is outside competence -

(a) to make any provision by subordinate legislation which would be outside the legislative competence of the Parliament if it were included in an Act of the Scottish Parliament, or

(b) to confirm or approve any subordinate legislation containing such provision."

As CAR is subordinate legislation, the court looks to the legislative competence of the Scottish Parliament. Section 29 of the 1998 Act provides, so far as relevant:

"(1) An Act of the Scottish Parliament is not law so far as any provision of the Act is outside the legislative competence of the Parliament.

(2) A provision is outside that competence so far as any of the following paragraphs apply -

(a) it would form part of the law of a country or territory other than Scotland, or confer or remove functions exercisable otherwise than in or as regards Scotland,

(b) it relates to reserved matters,

(c) it is in breach of the restrictions in Schedule 4,

.......

(3) For the purposes of this section, the question whether a provision of an Act of the Scottish Parliament relates to a reserved matter is to be determined, subject to subsection (4), by reference to the purpose of the provision, having regard (among other things) to its effect in all the circumstances.

(4) A provision which -

(a) would otherwise not relate to reserved matters, but

(b) makes modifications of Scots private law, or Scots criminal law, as it applies to reserved matters,

is to be treated as relating to reserved matters unless the purpose of the provision is to make the law in question apply consistently to reserved matters and otherwise."

[58] In this case parties discussed three provisions. In relation to the first, section 29(2)(a), Mr Sellar submitted that it was engaged because CAR, if interpreted as the respondents urged, would impact on the power of the liquidator of an English company to disclaim land in Scotland and thus interfere with his administration of the winding up of a company which was not registered in Scotland. I have not addressed the arguments as to the effect of CAR on section 178 of the 1986 Act because I am satisfied that the noters have made out their case in relation to the other two provisions.

[59] Under section 29(2)(b) and (3) the court looks to the purpose of the provision in deciding whether it relates to reserved matters. In doing so it looks to its effect, among other things. In Martin v Most 2010 SC (UKSC) 40, Lord Hope explained (paras 11-14) that the relevant provisions of the 1998 Act had been informed by concepts of "the pith and substance" and "the true nature and character" of legislation in earlier case law on rules of legislative competence. Section 29 of the 1998 Act applies its tests of competency to a particular provision or provisions in an Act of the Scottish Parliament. Thus the focus is properly on the purpose of the provisions of CAR which are said to restrict the power of a liquidator rather that the purpose of CAR as a whole.

[60] Mr Sellar submitted that it was not correct, as the respondents had argued, to treat the purpose of regulation 2 (the definition of responsible person) together with regulations 8 (water use licence) and 27 (surrender of licence) of CAR as being either to implement the framework directive or to ensure that there was always a person in place who was responsible for a relevant site. One had to look to the direct and immediate purpose of the provisions, which was that an insolvency practitioner acting in the official capacities listed in regulation 2 could not avoid the continuing obligations of the licensee company but had to seek to gain SEPA's consent to the surrender of the licence by using the funds held on behalf of the company's creditors to carry out remediation.

[61] I agree with Mr Sellar. The explanatory memorandum of CAR does not drill down to the specifics of these provisions. But on the respondents' interpretation of CAR, the effect of the provisions, which section 29(3) directs the court to consider among other things, is to remove a liquidator's power to disclaim and to compel him to spend creditors' funds in complying with the terms of the licence. The provisions, on that interpretation, would create an obligation which the liquidator would have to meet in priority over the preferential debts which Parliament set out in section 386 of and Schedule 6 to the 1986 Act.

[62] The third provision, section 29(2)(c), involves a consideration of Schedule 4 and part of schedule 5 to the 1998 Act. Schedule 4 provides:

"2.-(1) An Act of the Scottish Parliament cannot modify, or confer power by subordinate legislation to modify, the law on reserved matters.

(2) In this paragraph, "the law on reserved matters" means -

(a) any enactment the subject-matter of which is a reserved matter and which is comprised in an Act of Parliament or subordinate legislation under an Act of Parliament, and

(b) any rule of law which is not contained in an enactment and the subject-matter of which is a reserved matter.

and in this sub-paragraph "Act of Parliament" does not include this Act.

(3) Sub-paragraph (1) applies in relation to a rule of Scots private law or Scots criminal law (whether or not contained in an enactment) only to the extent that the rule in question is special to a reserved matter.

3.-(1) Paragraph 2 does not apply to modifications which -

(a) are incidental to, or consequential on, provision made (whether by virtue of the Act in question or another enactment) which does not relate to reserved matters, and

(b) do not have a greater effect on reserved matters than is necessary to give effect to the purpose of the provision.

(2) In determining for the purposes of sub-paragraph (1)(b) what is necessary to give effect to the purpose of a provision, any power to make laws other than the power of the Parliament is to be disregarded.

[63] The relevant reserved matters are contained in Schedule 5 to the 1998 Act in head C which relates to trade and industry. Section C2 of that Schedule provides:

"C2. Insolvency

In relation to business associations -

(a) the modes of, the grounds for and the general legal effect of winding up, and the persons who may initiate winding up,

(b) liability to contribute to assets on winding up,

(c) powers of courts in relation to proceedings for winding up, other than the power to sist proceedings,

(d) arrangements with creditors, and

(e) procedures giving protection from creditors.

Preferred or preferential debts for the purposes of the Bankruptcy (Scotland) Act 1985, the Insolvency Act 1986, and any other enactment relating to the sequestration of the estate of any person or to the winding up of business associations, the preference of such debts against other such debts and the extent of their preference over other types of debt."

[64] If the relevant provisions of CAR have the effect of (a) removing a liquidator's right to disclaim the property of a company and refuse to perform an obligation in relation to that property and (b) creating a new liquidation expense which would have to be met before the claims of preferential creditors, it seems to me that it would modify the law on reserved matters. While it would not be creating a preferential debt, it would be creating an obligation with priority over such debts which in many cases would be likely to exhaust the funds of an insolvent company. It would also be altering the order of priority on liquidation expenses in rule 4.67 of the Insolvency (Scotland) Rules 1986 if, as Mr Lake contended, the remuneration of the liquidator were to rank equally with the obligation to spend money to comply with CAR.

[65] I do not think that para 3 of Schedule 4 can affect that assessment as the alterations to the reserved insolvency regime are at the heart of these provisions in CAR. It is within the legislative competence of the Scottish Parliament in the context of CAR to reform the insolvency regime for individuals under the Bankruptcy (Scotland) Act 1985. But the alteration of the corporate insolvency regime would not fall within para 3 because it was not needed to give effect to the reform of the individual regime. Further, as Lord Rodger observed in Martin v Most (para 92) incidental and consequential modifications bring to mind those minor modifications which are often found in the schedules to an enactment. The alterations to the corporate insolvency regime are not of that nature.

[66] There is, as Lord Hope observed in Martin v Most (para 21), some duplication between section 29 and Schedule 4. In the present context the emphasis in section 29(2)(b) and (3) on the effect of the provisions invites the court to have regard to the practical effect of the provisions on the pre-existing law. Thus the creation of a new unavoidable obligation in a corporate insolvency which ranks before preferential debts relates to reserved matters under section 29(2)(b) and modifies the law in relation to reserved matters under para 2 of Schedule 4.

[67] I am satisfied therefore that section 101 of the 1998 Act requires me to adopt a narrower view of the relevant provisions of CAR so that the subordinate legislation is not outside devolved competence.

[68] In consequence, I conclude that the liquidators may disclaim the sites and release themselves from the obligations of CAR.

The third direction: a mechanism for the abandonment of land

[69] The noters ask for a direction whether the procedure set out in schedule 3 to their note is effective to cause the liquidators to abandon land and to abandon statutory licences.

[70] In the time available, parties have been able to address me only on CAR. I have not considered the terms of other statutory authorisations. Other than a helpful statutory reference which Mr Howie gave me, I have not heard the respondents' submissions on this direction as they concentrated their efforts on the first two directions. What I say has to be taken as applying to CAR and with the caveat that I have not heard a full argument on the matter.

[71] The noter's suggested procedure is as follows:

(a) Abandonment of Statutory Licences

(i) Completion by the Liquidator of a Notice, duly executed by him and dated, including such particulars as will enable the Licence to be identified, and in particular the nature, number, and date of the Licence.

(ii) Sending a copy of the Notice to each of

(a) the Registrar of Companies;

(b) Scottish Environment Protection Agency;

(c) the Local Authority in which the site or sites subject to the Licence is situated, and

(d) the Queen's and Lord Treasurer's Remembrancer.

(b) Abandonment of heritable property

(i) Completion by the Liquidator of a Notice, duly executed by him and dated, including such details as will enable the heritable property to be identified, and in particular the conveyancing description of the property.

(ii) Sending a copy of the Notice to each of

(a) the Registrar of Companies;

(b) Scottish Environment Protection Agency;

(c) the Local Authority in which the property is situated;

(d) the Scottish Coal Authority;

(e) the holders of a Floating Charge over the assets of the Company;

(f) any person benefitting from any servitude rights over the property, and

(g) the Queen's and Lord Treasurer's Remembrancer.

[72] Mr Sellar explained that in drafting schedule 3 to the note he had drawn on the procedures in England for the abandonment of onerous property under section 178 of the 1986 Act and had sought to identify all interested parties to whom intimation should be made.

[73] Subject to the following comments I think that his proposals are reasonable. They draw on analogous English procedures.

[74] First, it is very important that all interested parties are informed and I invite the noters to discuss with the respondents whether there are others to whom notice should be given.

[75] Secondly, as the abandonment of some of the sites might raise safety issues, the noters may wish to consider advertisement in local newspapers or identify some other means of facilitating local awareness that the sites have been abandoned. They may wish to discuss this with the relevant local authorities.

[76] Thirdly, in relation to the notice of the abandonment of the land I consider that the noters should also send a notice to the Keeper of the Registers of Scotland. Section 2(4)(c) of the 1979 Act is in my view wide enough to accommodate an abandonment (see, by way of analogy, Short's Trustee v Keeper of the Registers of Scotland 1996 SC (HL) 14, Lord Jauncey at 24). In a system of registered land it is important that notice is given to the land register so that some entry can be made to the title sheet to reflect the reality. See section 928 of the German Civil Code. The noters may wish to discuss with the Keeper the method by which this unprecedented transaction is to be recognised on the Land Register.

Conclusion

[77] I am satisfied that I should give directions that the noters may abandon the sites listed in schedule 2 to their note except in so far as they have disposed or will dispose of the sites to other persons. I also direct that the noters are not prevented by CAR from abandoning their water use licences. Those directions are to be understood in the light of this opinion. My guidance on the third direction is set out above.

[78] Parties agreed that I should continue consideration of the fourth direction to a date to be fixed. It was left to the noters, after discussion with the respondents, to decide whether they wished to obtain such further guidance.