Salvesen v Riddell [2012] CSIH 26, 15 March 2012
The appeal arises out of the background of reform to Agricultural Holdings (Scotland) Acts. A Bill was introduced on 16 September 2002. There was much speculation within the agricultural community as to how existing arrangements between landlord and tenant might be affected. The effect of section 72 of the Agricultural Holdings (Scotland) Act, as enacted, was that where the landlord served notice of dissolution of a limited partnership tenant, between 16 September 2002 and 30 June 2003, the general partner is given a 1991 Act tenancy, if he complies with certain notice requirements, and the landlord does not obtain an order of the Land Court under section 72(8) of the 2003 Act. Section 73 enabled a landlord, as limited partner, to serve a notice of dissolution on or after 1 July 2003 and thereafter an incontestable notice to quit and thus terminate the tenancy within about three years.
The landlord had applied to the Land Court for an order under section 72(8) of the 2003 Act and for removing of the respondents, on the basis that when the landlord bought the holding he intended, when the tenancy came to an end, to amalgamate Peaston with other adjacent farms which he owned and farm them as one unit. The two questions for the Land Court were first, whether the notice of dissolution had been served otherwise than for the purposes of depriving the respondents of any right deriving from section 72, and second, if so, whether it was reasonable for the Land Court to make the order applied for. No argument based on Convention rights was developed before the Land Court. The Land Court held that they were bound to conclude that the main purpose of the notice had been to avoid the risk that a provision in the 2003 Act would prevent the appellant from terminating the tenancy on the due date specified in the notice of dissolution. The landlord appealed to the Court of Session. After grounds of appeal were lodged, the appellant changed solicitors. His new solicitors, Messrs Gillespie MacAndrew, Edinburgh, following advice from counsel, added arguments based on Convention Rights.
The Lord Justice Clerk (Gill), with whom Lords Osborne and Nimmo Smith agreed, identified four issues in the appeal. The first was the true construction of section 72(9) of the 2003 Act disregarding Convention questions. His Lordship held that the statutory phrase a right deriving from this section had to be read as including a right of the kind conferred by section 72 that might be derived from a provision of the 2003 Act. Deriving from was intended to cover rights accruing to the general partners in consequence of the 1991 Act tenancy conferred on them by the Agricultural Holdings (Scotland) Act 1991 and by related legislation. In order to give content to section 72(9)(a)(i) the court had to decide whether the notice was served with an underlying purpose that was not simply to prevent the general partner from acquiring rights under the legislation. A purpose other than one to which section 72(9)(a)(i) refers exists where the landlord served notice in implementation of a pre-existing plan in the fulfilment of which the dissolution of the partnership in accordance with the partnership agreement was a necessary step. That depended on the facts and circumstances. The landlord was therefore, contrary to the Land Court’s decision, entitled:- to a proof of his averments that his purpose to end the tenancy was part of a plan of amalgamation, formed when he purchased Peaston; and to show that it would be reasonable to grant an order negating the effect of section 72(6), thus rendering the dissolution notice effective and bringing the tenancy to an end.
The second issue was whether section 72 was Convention compliant. This issue arose because it was possible that the landlord might fail to prove his case as to his underlying purpose and its reasonableness. The Lord Justice Clerk held that restrictions on a landlord’s right to terminate a lease and recover possession amounted to a control of use of property within the meaning of Article 1 of the First Protocol (A1P1). A1P1 was therefore engaged. His Lordship accepted that the inclusion of retrospective anti-avoidance measures in the 2003 Act could serve a legitimate general interest. In order to determine whether the measures taken in section 72 were justified it was necessary to consider the way in which the section served the general interest and whether it was appropriate and proportionate. The question was whether section 72, in its application to notices served between 16 September 2002 and 30 June 2003, was an appropriate and proportionate means of preventing avoidance of the new provisions favouring the position of the general partner. That question could not be seen apart from section 73 which provided for consequences that are more favourable to the landlord who served notice of dissolution on or after 1 July 2003.
Lord Gill concluded that the consequences of section 72 were arbitrary and excessive. The general partner is given a 1991 Act tenancy and is exposed to the tenant’s contingent right to buy. By contrast a landlord who serves notice of dissolution on or after 1 July 2003 could bring the tenancy of the former general partner to an end by an incontestable notice to quit served in accordance with section 73 of the 2003 Act. Section 72 was also arbitrary because it affected all notices of dissolution in the period between 16 September 2002 and 30 June 2003 no matter how long the period of notice was. It was essentially punitive. The suggestion, made in the Scottish Parliament by the Deputy Minister that dissolutions effected in anticipation of the legislation were immoral, was unjustified as such notices were served exactly in accordance with the partnership contract and would have been unaffected by the proposals for law reform current at the time. There was no reason to penalize a landlord who served a notice of dissolution during that period. Moreover, section 72 notices could not be unilaterally withdrawn as Parliament may have thought. There was thus no justification for the differential treatment of landlords in sections 72 and 73. The appellant’s rights under A1P1 would be violated if section 72, construed as above, were to be applied to him.
In relation to Article 14 of the Convention, the court held that the difference in treatment between landlords serving notices before or after 1 July 2003 did not amount to discrimination on the grounds of status or personal characteristic. The argument added nothing to the A1P1 argument.The third issue was whether section 72 could be construed compatibly with the European Convention. It could not. Section 72 could not be read so as to remove the comparative inequity of treatment prescribed for notices served pre 1 July 2003 and notices served on or after that date.
The fourth issue was the remedy to be granted in the light of the court’s conclusions. This was not fully explored at the hearing. Severance of the offending parts of the legislation had to be considered, along with the consequences for persons who were not party to the proceedings. Accordingly, although the appeal has been allowed and the court has concluded that the appellant’s rights under A1P1 are violated by section 72, further hearings before the Inner House have been arranged to consider and deal with the ramifications of the court’s decision.
Mr. Reid has asked us to acknowledge the invaluable assistance he received from Mungo Bovey QC of the Murray Stable who was also instructed at an earlier stage of the case.
This case is the second landmark decision in agricultural law in the last fifteen years. The first was Morrison-Low v Paterson’s Exrs 2012CSIH 10, an appeal from the Scottish Land Court about rent review, in which J Gordon Reid Q.C., F.C.I.Arb. also appeared for the successful party.
