Judges reject tenant farmers’ application to appeal to UK Supreme Court over compensation claim for human rights breach

Tenant farmers who were seeking to challenge a decision to refuse to pay them compensation following an amendment to agricultural holdings legislation have had an application for permission to appeal to the UK Supreme Court dismissed.

 

Six limited partnerships raised judicial review proceedings alleging that they had suffered “loss, injury and damage” as a result of the making of the Agricultural Holdings (Scotland) Act 2003 Remedial Order 2014, but the Inner House of the Court of Session upheld a decision of the Lord Ordinary to reject their claims over how compensation should be calculated.

 

The applicants applied for permission to appeal to the UK Supreme Court, but the First Division judges ruled that “no arguable point of law” was raised in the applicants’ application, and no issue was raised of sufficient “general public importance” to be considered by the Supreme Court at the present time. 

 

 

The Remedial Order, which came into force in April 2014, was passed by the Scottish Parliament following the UK Supreme Court ruling in the case of Salvesen v Riddell [2013] UKSC 22, in which court held that certain provisions in section 72 of the Agricultural Holdings (Scotland) Act 2003, which affected limited partners who served dissolution notices in relation to a limited partnership tenancy between September 2002 and June 2003, were contrary to the European Convention on Human Rights.

 

The Lord President, Lord Carloway, sitting with Lord Menzies and Lord Drummond Young, heard that the petitioner Richard McMaster, a general partner of a limited partnership which carries on the business of farming on tenanted land, together with the general partners of five other limited partnerships, raised judicial review proceedings against Scottish Ministers, alleging that the making of the Remedial Order without express provision for the assessment and payment of compensation to the petitioners was in breach of the their rights under article 1 of the First Protocol (A1P1) to the European Convention, and was accordingly outwith the powers of Scottish Ministers or the Scottish Parliament in terms of section 57(2) of the Scotland Act 1998.

 

Following a a hearing, the Lord Ordinary pronounced an interlocutor on 31 May 2017 which deleted substantial elements of the petition. 

 

In particular, the Lord Ordinary sustained the respondents’ pleas-in-law challenging the relevancy of the claims made by the limited partnerships and the limited partners - the result of which was that only the claims made by the general partners remained.  

 

The Lord Ordinary further deleted the petitioners’ claims in so far as they were based on an alleged “legitimate expectation” that following the passing of section 72 of the 2003 Act in its original form they would in due course acquire a secure 1991 Act tenancy. 

 

The Inner House refused a reclaiming motion by the applicants, following which they applied for permission to appeal to the UK Supreme Court under section 40 of the Court of Session Act 1988.

 

The applicants contended that the Inner House erred in law in failing to recognise that the limited partnerships that held the tenancies of each of the leases prior to the coming into force of the 2003 Act were “simply a device”, and that the reality of the situation, which was relevant for the purposes of A1P1, was that the relevant general partner was the tenant throughout for the purposes of any claim. 

 

However, the judges described that ground of appeal as “unfounded”.

 

Lord Drummond Young said: “We made it clear in our opinion that we had regard to the reality of the situation rather than to legal niceties, and we applied such an approach throughout. The contention to the contrary displays a fundamental failure to understand elementary aspects of our reasoning.”

 

 

The applicants also contended that each general partner “had a legitimate expectation that he could act on the expectation of acquiring a secure 1991 Act tenancy before the section 72(6) notice was served which was linked both to the tenancy and the family farming business”. 

 

This was said to have constituted a “possession” for the purposes of A1P1, and would give rise to an “entitlement to compensation”.

 

It was further submitted that the court was in error in holding that no relevant claim for compensation under A1P1 arose from the loss of the secure 1991 Act tenancy when this was caused by the actings and error of the state and was not remedied for approximately 10 years, during which time the general partners had acted on the faith of having obtained a secure 1991 Act tenancy.  

 

But the court did not consider that either point was an arguable ground of appeal.

 

The next ground of appeal was to the effect that the court failed to recognise that the lack of payment of any consideration for security of tenure was a factor that might only have a bearing on the quantum of compensation paid for the loss of the secure 1991 Act tenancies, but was not relevant to whether there was a loss to be compensated, and that when compensation is paid it Gould amount to “full market value”.

 

The court observed that, at an abstract level, that may be correct in cases where full compensation for the value of a possession is due, but in the present case the court had decided that compensation for loss of the security of a 1991 Act tenancy was not payable; only losses caused by a reasonable reliance on the 2003 Act were recoverable. 

 

A further ground of appeal was that the Inner House held that the effect of Salvesen v Riddell, was that the whole of section 72 was incompatible with A1P1, and not merely subsection (10), but the judges said there was “no basis” for this ground.

 

Lord Drummond Young explained: “The court, at paragraphs [34] and [35] of its opinion, made the limited effect of the decision in Salvesen clear: that the indefinite security of tenure that had purportedly been conferred on a limited number of tenants was incompatible with the landlords’ Convention rights.  

 

“The court did not find that any such secure 1991 Act tenancy was a nullity; its incompatibility was limited, but it affected the ability of landlords to make use of the new limited duration tenancy. That was critical in the present case. We cannot discover any arguable error of law in this connection.” 

 

The final ground of appeal was that the Inner House was in error in treating the deprivation of a secure 1991 Act tenancy as relating to a control on the use of possessions as opposed to a deprivation of possessions, but the judges agreed with the Lord Ordinary that the same principles would have applied whether the case was characterised as control of use of possessions or as deprivation of possessions. 

 

 

The court refused the application as the test for granting permission to appeal had not been met.

 

In a written statement of reasons, Lord Drummond Young said: “For the foregoing reasons we are of opinion that there is no arguable ground of appeal disclosed in the present application. Furthermore, we do not think that any of the points raised can be properly considered of general public importance, or that they ought to be considered by the United Kingdom Supreme Court at this time.  

 

“So far as the general law is concerned, the matters raised by the applicants have all been the subject of previous decisions. The effectiveness of using a limited partnership was considered in MacFarlane v Falfield Investments Ltd, supra, and the defects in the Agricultural Holdings (Scotland) Act 2003 were identified in Salvesen v Riddell, supra.  

 

“The principles that govern the application of article 1 of the First Protocol are discussed at length in a substantial number of cases in the European Court of Human Rights. In these circumstances it cannot be said that there is any question of general of general public importance that requires to be determined in the present case.

 

“In particular, the question of what amounts to a possession for the purposes of the Convention is clear from the Strasbourg cases, and it is not in dispute that the leases purportedly conferred by the 2003 Act were ‘possessions’. The concept of legitimate expectation is also discussed at length in cases before the European Court of Human Rights, and we consider that once again the concept is well established. 

 

“The present case is concerned with the application of the principles laid down in the Strasbourg case law to a particular set of facts.”