Scottish Court of Session Decisions

SECOND DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lord Osborne Lord Nimmo Smith	[2012] CSIH 26 XA107/10 OPINION OF THE LORD JUSTICE CLERK in the appeal by ALASTAIR ERIC HOTSON SALVESEN Landlord and Appellant; against JOHN RIDDELL and ANDREW RIDDELL Tenants and Respondents: and THE LORD ADVOCATE Intervener _______

For the landlord and appellant: Reid QC; Gillespie Macandrew LLP

For the tenants and respondents: Ellis QC; Balfour and Manson

For the Intervener: Mure QC; Scottish Government Legal Directorate

15 March 2012

Introduction

[1] This is an appeal against an Order of the Scottish Land Court dated 29 July 2010. It relates to the construction of section 72 of the Agricultural Holdings (Scotland) Act 2003 (the 2003 Act) and its compatibility with the European Convention on Human Rights.

The facts

[2] The appellant owns Peaston Farm, near Ormiston, East Lothian. He bought it in 1998. It was then subject to a tenancy held by a limited partnership of which the respondents were the general partners. The appellant appointed his agent, Anthony Whale, as limited partner in succession to the nominee of the previous landlord.

[3] The limited partnership was entered into in 1992. It was to run to 28 November 2008 and from year to year thereafter, unless notice of dissolution was given in terms of the partnership agreement.

[4] The lease to the limited partnership was entered into at the same time. It too was to run to 28 November 2008; but, so long as the partnership continued to exist, it would continue from year to year thereafter by tacit relocation unless an effective notice to quit was given (Agricultural Holdings (Scotland) Act 1991 (the 1991 Act), s 3).

[5] On 3 February 2003 the limited partner gave notice to the respondents that the partnership would be dissolved on 28 November 2008. 3 February was a significant date, as will become clear.

[6] On 12 December 2008 the respondents gave notice to the appellant under section 72(6) of the 2003 Act that they intended to become the joint tenants of the subjects in their own right.

Part 6 of the 2003 Act
Background to the legislation

[7] In the post-war reorganisation of British agriculture, Parliament conferred on the agricultural tenant security of tenure, rights of succession and the opportunity that the lease could continue for an indefinite number of generations, and imposed certain onerous liabilities on the landlord for the fixed equipment and for statutory compensations (Agriculture (Scotland) Act 1948 (the 1948 Act), Part 1). The tenant's position was further secured by judicial recognition of the principle that any provision in the lease or in a collateral agreement that purported to deprive the tenant of his security of tenure was not enforceable (Johnson v Moreton [1980] AC 37; Featherstone v Staples [1986] 1 WLR 661). Under the 1948 Act and its successors, the Agricultural Holdings (Scotland) Acts 1949 and 1991 (the 1949 and 1991 Acts), the granting of fixed term lets was not possible.

[8] The existence of an agricultural tenancy greatly reduced the value of the landlord's interest. A landlord who sought to sell the land could sell it with vacant possession only with the tenant's agreement. As a result, the tenancy had a value to the tenant related to the premium that the tenant could exact from the landlord for an agreed renunciation of the lease (Baird's Exrs v IRC 1991 SLT (Lands Tr) 9). The letting of agricultural land to an individual was therefore not in the landlord's best interests.

[9] In due course the market devised its own solution. Instead of making the individual his tenant, the landlord made him the general partner in a limited partnership in which the landlord or his nominee was the limited partner. The limited partnership had a fixed duration. The landlord granted the lease to the limited partnership for the same duration. By putting the partnership out of existence by dissolving it in accordance with its terms, the landlord could bring the lease to an end (IRC v Graham's Trs 1971 SC (HL) 1). In this way the landlord was assured of recovering vacant possession at a specified date, but had the flexibility to allow the partnership and the lease to continue thereafter by tacit relocation with power to dissolve the partnership at any anniversary. A contractual arrangement of this kind was not objectionable in principle (MacFarlane v Falfield Investments Ltd 1998 SC 14).

[10] Such an arrangement was less advantageous to the general partner than a tenancy; but numerous cases in the Scottish Land Court Reports, which I need not cite, demonstrate that when limited partnership lets were offered in the open market there was strong competition for them, with consequent upward pressure on open market rents. In 1983 there was an unsuccessful attempt to proscribe such lets by way of a proposed amendment to the Agricultural Holdings (Amendment) (Scotland) Bill (HC Deb vol. 41, cols 454-459).

[11] By the end of the last century virtually all new lettings in Scotland were granted on a limited partnership basis. Such few tenancies as were obtained by individuals were usually the result of naivety on the part of the landlord or of carelessness in the operation of grazing lets.

[12] On 4 February 2003 in a debate in the Rural Development Committee of the Scottish Parliament on the Agricultural Holdings (Scotland) Bill (infra), the Minister was unable to provide statistical data on the number of limited partnerships that had been created or dissolved (col 4161); but research on the subject published in 1989 and 1996 indicated that the number of such tenancies ran into thousands (Blight, Land Tenure Forty Years On (1989) JLSS 463; Stockdale and Lang, The Limited Partnership Tenancy in Scotland, (1996) 9 Farm Management 336). A survey by the Royal Institution of Chartered Surveyors in 1995 indicated that of the land in Scotland that was held under various forms of tenure, which for this purpose included share farming, contract farming, management agreements and short term lets, about 24% was held on limited partnership leases.

History of the legislation
The White Paper

[13] In May 2000 the Scottish Executive published a White Paper Agricultural Holdings - Proposals for Legislation. This identified land reform, and particularly reform of the agricultural holdings legislation, as a key priority. In recognition of the realities of the situation, it accepted the principle that it should be open to landlords to grant fixed term tenancies; but it proposed that such tenancies should be granted to individuals rather than to partnerships. The proposed lines of reform were indicated as follows:

"2.9 Given the advantages that this new option [sc the limited duration tenancy] will have, and in particular to ensure suitable security for future tenants, the creation of the new tenancy will be accompanied by the discontinuation of the use of limited partnerships for all new agricultural leases, whether secure or limited duration. This will be achieved by amendment of the 1991 Act to debar limited partnerships as new tenants. Existing leases where the tenant is a limited partnership will not be affected."

The last sentence that I have quoted was reassuring to landlords in existing limited partnership tenancies.

[14] The White Paper did not propose that the tenant should have the right to buy.

The NFU Scotland/SLF Agreement

[15] After the publication of the White Paper the National Farmers Union of Scotland and the Scottish Landowners' Federation had discussions regarding the details of the proposed new tenancy arrangements. They concluded an agreement and submitted it to the Scottish Ministers in May 2001.

The Draft Agricultural Holdings (Scotland) Bill Consultation Paper

[16] In April 2002 the Scottish Executive published a Consultation Paper incorporating the Draft Bill. The substance of section 42 of the Draft Bill, which was to apply only to partnership lets entered into after the commencement of the Act, was repeated in section 58 of the Bill that was later to be introduced to the Scottish Parliament. That section was to become section 70 of the 2003 Act.

The Agricultural Holdings (Scotland) Bill (as published)

[17] On 16 September 2002 the Agricultural Holdings (Scotland) Bill was introduced in the Parliament.

[18] Section 1 dealt with any future grant of a tenancy to which the 1991 Act would previously have applied. It provided that the 1991 Act would not apply to such a tenancy unless the lease was entered into in writing before the commencement of the tenancy and expressly stated that the 1991 Act was to apply in relation to it.

[19] Sections 23 to 33 provided that a 1991 Act tenant who registered his interest with the Registers of Scotland would have a pre-emptive right to buy the land of which he was tenant if the landlord were to take certain steps to transfer it. This right would be enforceable against third party purchasers.

[20] Section 58 dealt with future tenancies in which the tenant was a partnership in which the landlord or his associate was a partner. It provided inter alia that if the landlord or his associate purported to terminate such a tenancy by dissolving the partnership, then on the giving of notice by one of the other partners, the tenancy would be deemed to continue in force with that partner as tenant in his own right.

[21] The Bill did not affect existing limited partnership tenancies.

The Minister's letter of 19 November 2002

[22] In this letter the Minister for the Environment and Rural Development gave notice to the Convener of the Rural Development Committee as follows:

"Section 58 includes anti-avoidance provisions that will apply to tenancies entered into in future, where a limited partnership (or other partnership) has been created as the tenant. These provisions will enable the general partner (ie the de facto tenant) in such partnerships to enforce the rights they would have had if they had been the tenant in their own right.

[I should add that I have not yet closed my mind to the option of providing a right to buy for existing general partners in 1991 Act tenancies where the tenant is a limited partnership. Although the consultation on the draft Bill did not reveal much support for this, a number of tenant farmers have separately urged me to extend the right in this way]." (emphasis and parenthesis in the original)

The parenthetical statement in the letter perhaps gave cause for concern to landlords in limited partnership tenancies, but it did not set out a concluded policy decision on the point.

Amendment 169: Stage 2

[23] On 3 February 2003 the Parliament published a Marshalled List of Amendments for Stage 2. Amendment 169 was proposed by the Scottish Executive. It proposed a new section, to follow section 58, that was to apply to existing limited partnership tenancies. It was to the effect inter alia that if an existing tenancy was purportedly terminated by the limited partner's serving notice of dissolution of the partnership during the period from 4 February 2003 to the "relevant date" (infra), the general partner could apply to the Land Court for an order that the tenancy was to continue with the general partner as tenant in his own right, that is to say as a 1991 Act tenancy. The Land Court was to make the order if it was satisfied that it was unreasonable for the tenancy to be terminated and that it was reasonable to make the order. It followed from this proposal that if the Land Court were to make such an order, the general partner, qua tenant, would be able to take advantage of the right to buy provisions that the Bill proposed.

[24] On the same date the limited partner in this case served the notice of dissolution. The notice was therefore not affected by amendment 169.

The Ministerial explanation for Amendment 169

[25] On 4 February 2003 the amendment was discussed by the Rural Development Committee. The Deputy Minister for the Environment and Rural Development referred with disapproval to recent instances where landlords had dissolved limited partnerships. He suggested that they had done so in fear of the Bill and in particular in fear of the introduction of an absolute right to buy for 1991 Act tenants. This was his explanation of the Scottish Ministers' policy:

"As I said, I accept that, at this time of uncertainty, general partners want and deserve protection from dissolution of the limited partnership of which they are part. Executive amendment 169 provides that. If the committee agrees to amendment 169, landlords will be on warning from today that they had better have a good reason for initiating dissolution proceedings against a limited partnership. That is from today - we can deal with subsequent applications. The general partner will have the right to apply to the Scottish Land Court if the partnership is dissolved. If the Land Court accepts that the landlord did not have reasonable grounds for dissolving the partnership, it will be able to make the general partner the tenant in place of the limited partnership ... The general partner can therefore become a secure tenant in their own right.

The reasonableness test is obviously an important aspect of the new section that amendment 169 will add. We will liaise closely with the industry and the Land Court on how that might be refined. I acknowledge that a landlord might have several legitimate reasons for wanting to dissolve a partnership. It will be our job to work the reasonableness test around them. I also want to encourage landlords' efforts to enter into new LDTs [limited duration tenancies] and SLDTs [short limited duration tenancies] with their general partners, which could be a legitimate reason for dissolution proceedings." (Col 4164).

[26] The amendment was agreed to by the Committee and was inserted in the draft Bill as section 58A (Col 4181).

Amendment 111: Stage 3

[27] A further Marshalled List of Amendments for Stage 3 was published on or about 10 March 2003. Amendment 111 proposed a significant amendment to the newly inserted section 58A. Section 58A(6), when so amended, would provide inter alia that where notice of dissolution was served on or after 16 September 2002 but before the relevant date, the tenancy would continue in effect with the general partner as tenant if the general partner gave notice to that effect. In that event the landlord could apply to the Land Court for an order that section 58A(6) did not apply. The Land Court could make such an order only if it was satisfied that the dissolution notice had been served otherwise than for the purposes of depriving any general partner of any right deriving from the section and that it was reasonable to make the order. A further amendment 111A was tabled by an opposition member (Fergus Ewing MSP) to move the start date from 16 September 2002 to 16 April 2002.

[28] Amendment 111 was potentially calamitous for some landlords. It made the landlord's position even weaker than it had been after amendment 169. Under amendment 169 the general partner could become tenant only if he applied to the Land Court and established the specified grounds: but under amendment 111 the general partner, on giving notice, became tenant unless the landlord applied to the Land Court and established the specified conditions. But worst of all, from the landlord's point of view, amendment 111 was retrospective. It caught notices of dissolution that had been served in the period since the Bill was introduced. It therefore caught notices served when the assurance in the White Paper that existing limited partnership leases would not be affected by the legislation had not been withdrawn or qualified. The new proposal had particular significance for landlords because of the right to buy provisions.

Amendment 113

[29] The Marshalled List of Amendments for Stage 3 also included amendment 113 which inserted a further section to follow section 58A. This was to apply where the tenancy continued to have effect by virtue of proposed section 58A(6). It allowed the landlord to terminate the tenancy at the end of its contractual duration by giving intimation of his intention to do so and then giving notice to quit. I shall discuss this provision later.

The Ministerial explanation for amendments 111 and 113

[30] On 12 March 2003 at the Stage 3 debate the Deputy Minister said:

"Section 58A was introduced to the bill at stage 2 to bring in protections for general partners within a limited partnership that is the tenant in a 1991 Act tenancy. It was introduced to address a developing situation in which a number of landlords had served dissolution notices on partnerships pending the final shape of this legislation. That attempt by landlords to protect their position put the general partners in a situation of great uncertainty and faced them with the threat of imminent eviction.

The provision has already had the desired effect of plugging the flow of dissolution notices that were being served. However, we also undertook at stage 2 to consider refining the provision, including by extending its application to partnerships on which dissolution notices were served prior to 4 February. Executive amendments 111 to 114 reflect our response to that further consideration and consultation with the industry.

Amendment 111 makes important changes to section 58A. First, the scope of the section is extended to include limited partnerships on which a dissolution notice was served in the period between 16 September 2002, when the bill was introduced, and 3 February 2003. In those cases, section 58A will apply so that the general partner can apply to the Land Court to become a secure tenant where the partnership is or has been dissolved.

Exemptions will apply under subsection (5) to cater for situations where the rights of third parties might otherwise be affected. Those are any situation where the partnership had already been dissolved and the land was either re-let or sold to a new owner and instances where the landlord had entered into a binding contract either for the sale of the land with vacant possession or a lease with a new tenant, with a future date of entry.

I am conscious that there may be examples where a landlord served a dissolution notice prior to 16 September for a questionable reason. Amendment 111A attempts to address that by proposing an earlier date of 16 April 2002. After mature reflection, however, we believe that the use of the date 16 September captures the vast majority of dissolution notices served as a response to uncertainty about the contents of the bill" (cols 16315-16316).

The Deputy Minister described the service of notices of dissolution in the run-up to 3 February 2003 as "immoral" (col 16317).

[31] The debate continued on the question whether section 58A should apply to notices from 16 September 2002 (Amendment 111) or 16 April 2002 (Amendment 111A). On this point the Deputy Minister said:

"I accept that legitimate notices of dissolution would have been served that were unrelated to any attempt by landlords to obviate the impact of the bill. I also accept that the circumstances that then prevailed, with SNP members promoting the absolute right to buy, was an influence in that process. However, that did not give the moral justification to landlords to act in that manner.

In the instances to which I referred earlier, proposed section 58A(8A) imposes a strong onus on the landlord to demonstrate that, where a partnership was subsequently dissolved, the dissolution was for a reasonable purpose. We believe that a number of landlords might suffer undue hardship if the provision covered all partnerships on which dissolution notices were served on a date before 16 September 2002, including, for example, 16 April.

I agree with Stewart Stevenson and Fergus Ewing that, in many respects, any date would be arbitrary. The normal period of notice for dissolution is six or 12 months, depending on the terms of the partnership. There will always be deserving cases that fall on the wrong side, no matter how early a date is set. For example, when I pressed the Scottish Tenant Farmers Action Group on the matter, reference was made to a case that predated the April date and was set in motion way back in November 2001. Equally, however, it must be agreed that the setting of an earlier date might catch landowners who had acted reasonably in dissolving partnerships. However, the earlier the date is set, the greater the likelihood of unintended consequences arising. On balance, and after mature reflection, Mr Finnie [the Minister] and I concluded that the appropriate cut-off point that would catch most of the 150 to 200 examples that we have heard about would be 16 September.

Where a notice to dissolve a limited partnership has been served in the period from the day of introduction of the amendment relating to section 58A, which was 4 February 2003, to a date to be set by ministers by order-which is as yet unspecified but is described in the bill as 'the relevant date'-section 58A, in its present form, will apply. In practice, we intend that the relevant date will be on or shortly after the commencement date for the provision.

The provisions will provide a strong disincentive for landlords who might be considering action to dissolve a limited partnership in the period before the new legislation comes into force. We have taken care to develop the bill in a way that respects landlords' legitimate rights. As Alex Fergusson will no doubt remind us, there is no reason why a landlord should want to dissolve a limited partnership in order to avoid the consequences of the bill. We hope and believe that landlords and their agents will soon recognise that fact. As the situation settles down, the need for section 58A will diminish. That is why the provisions are to apply until the relevant date.

Of course, there are circumstances where the landlord has legitimate reasons for wanting to dissolve the partnership. That is why a limited right would be introduced in proposed subsection (8A) for the landlord to apply to the Land Court for an order stating that the rights given by section 58A should not apply and should be set aside. That is to cover instances in which the landlord genuinely needed the land back in hand and could suffer loss if the land were not returned quickly. I trust that, having considered the arguments in a mature way, Fergus Ewing is comfortable about the way in which the test of reasonableness will work and is sufficiently reassured not to press amendment 111A.

Recent events have demonstrated that many general partners are in an insecure position in the longer term. That is unacceptable. That is why we propose to introduce a new section through amendment 113. The new section will require a landlord to serve the same double notice to quit on a general partner as they would on a tenant with a limited duration tenancy, regardless of the length of the dissolution notice period. As a result, the general partner will then have up to three years' notice to quit and the double notice procedure will also provide a window for the landlord and general partner to consider their next steps" (Cols 16317-116318) ...

I genuinely believe that this package of amendments ensures that section 58A can provide the necessary protections for general partners currently and in future, without impacting unduly on the rights of landlords who had legitimate cause to dissolve. I hope that Fergus Ewing will not move amendment 111A" (Col 16319) ...

After the bill has been passed, the solution would be an industry agreement to rescind dissolution notices that have been issued inappropriately or to convert tenancies into [limited duration tenancies]. The earlier the date we choose, the more likely we are to face unrelated consequences and disputes with third parties. That is why, on balance and after mature reflection, we believe that 16 September is the appropriate cut-off point and will cover the vast majority of the 150 to 200 cases that we know about" (Col 16327).

[32] Amendments 111 and 113 were agreed to. Amendment 111A was rejected (cols 16365, 16368). Section 58A was substantively amended and given effect from 16 September 2002; and the new section 58B was added.

The passing of the 2003 Act and the coming into force of the relevant provisions

[33] On 12 March 2003 the Bill was passed. On 22 April 2003 the Act received Royal Assent. The provisions affecting partnership lets constituted Part 6 of the Act.

[34] Section 70(10) came into force on 1 July 2003. Section 70(7) and (8) came into force on 22 May 2003. The remainder of the section came into force on 27 November 2003.

[35] The former sections 58A and 58B of the Bill (supra) became sections 72 and 73. On 22 May 2003, section 72, other than subsections (2) and (10), came into force (Agricultural Holdings (Scotland) Act 2003 (Commencement No 1) Order 2003 (SSI No 248)). On 1 July 2003 section 72(10) and section 73 came into force (Agricultural Holdings (Scotland) Act 2003 (Commencement No 2) Order 2003 (SSI No 305)). On 27 November 2003 the remainder of Part 6 came into force (Agricultural Holdings (Scotland) Act 2003 (Commencement No 3, Transitional and Savings Provisions) Order 2003 (SI No 548)).

The relevant provisions
Section 1

[36] Section 1 provides inter alia as follows:

"(1) This subsection applies where-

(a) a lease is entered into on or after the coming into force of this subsection; and

(b) the tenancy under the lease is a tenancy of an agricultural holding in relation to which the Agricultural Holdings (Scotland) Act 1991 ... (in this Act referred to as 'the 1991 Act') would have applied had the lease been entered into immediately before the coming into force of this subsection.

(2) Where subsection (1) applies, the 1991 Act does not apply in relation to the tenancy (except in so far as this Act applies any provision of that Act to short limited duration tenancies or limited duration tenancies) unless the lease-

(a) is entered into in writing prior to the commencement of; and

(b) expressly states that the 1991 Act is to apply in relation to,

the tenancy ...

(4) Where, in respect of a tenancy of an agricultural holding-

(a) the lease is entered into before the coming into force of this subsection and the 1991 Act applies in relation to the tenancy; or

(b) the lease is entered into on or after the coming into force of this subsection and (by virtue of the conditions mentioned in paragraphs (a) and (b) of subsection (2) being fulfilled) the 1991 Act applies in relation to the tenancy,

the tenancy under the lease is in this Act referred to as a '1991 Act tenancy'."

Section 70

[37] Section 70 applies to tenancies that are held by a partnership, and not necessarily a limited partnership, in which the landlord or his associate is a partner. It applies inter alia to a new 1991 Act tenancy where the lease is entered into on or after the date on which the section comes into force. The effect of it is that if the landlord should bring the tenancy to an end by dissolving the partnership and if, in response, the non-landlord partner gives notice in accordance with the section, the tenancy will continue in existence but with the non-landlord partner as tenant in his own right. This is in effect a statutory assignation of the tenancy to the non-landlord partner.

[38] The section provides inter alia as follows:

"(1) Subsection (2) applies to -

(a) a 1991 Act tenancy if the lease constituting the tenancy is entered into on or after the coming into force of this section; and

(b) a tenancy under a lease constituting a short limited duration tenancy or a limited duration tenancy,

where the tenant is a partnership.

(2) Where this subsection applies and -

(a) any partner is -

(i) the landlord or an associate of the landlord; or

(ii) a partnership or a company in which the landlord has a relevant interest; and

(b) there is any other partner.

Subsections (3) and (4) apply.

(3) Where this subsection applies, any partner not mentioned in subsection (2)(a) may exercise or enforce any right of a tenant conferred by virtue of this Act or the 1991 Act as if the partner were the tenant in the partner's own right.

(4) Where this subsection applies, if the tenancy purports to be terminated as a consequence of -

(a) the dissolution of the partnership -

(i) in accordance with the partnership agreement; or

(ii) due to the actings of any partner mentioned in subsection (2)(a);

(b) the renunciation of the tenancy by such a partner; or

(c) a breach of the tenancy by such a partner,

subsection (5) applies.

(5) Where this subsection applies, notwithstanding the purported termination of the tenancy -

(a) the tenancy continues to have effect; and

(b) any partner not mentioned in subsection (2)(a) becomes the tenant (or a joint tenant) under the tenancy in the partner's own right,

if the partner gives notice to the landlord in accordance with subsection (6).

(6) Notice is given in accordance with this subsection if -

(a) it is in writing;

(b) it is given within 28 days of the purported termination of the tenancy; and

(c) it states that the partner intends to become the tenant (or a joint tenant) under the tenancy in the partner's own right.

(7) For the purposes of this section and section 72, a landlord has a relevant interest in a partnership or company if the landlord or an associate of the landlord is

(a) a partner in the partnership;

(b) a partner in a partnership which forms part of the partnership;

(c) a shareholder in the company; or

(d) the holder of a standard security or floating charge over an interest in a tenancy where the partnership or the company is a partner in the tenant.

(8) For the purposes of this section and section 72, a person is an associate of a landlord if the person is -

(a) where the landlord is a partnership or a company, a partner in the landlord or, as the case may be, a shareholder of the landlord;

(b) where an associate of the landlord is a partnership or a company, a partner in or, as the case may be, a shareholder of that associate;

(c) an agent of the landlord or of an associate of the landlord; or

(d) a member of the landlord's family ... "

Section 72

[39] Section 72 provides inter alia as follows:

(1) Subsections (2) and (3) apply to a 1991 Act tenancy where the lease constituting the tenancy is entered into before the coming into force of this section and-

(a) the tenant is a limited partnership; and

(b) any limited partner is-

(i) the landlord or an associate of the landlord ...

(2) Where this subsection applies, any general partner may exercise or enforce any right of a tenant conferred by virtue of Part 2 of this Act as if the partner were the tenant in the partner's own right unless the conditions mentioned in subsection (5) are met.

(3) Where this subsection applies and the tenancy purports to be terminated as a consequence of-

(a) the dissolution of the partnership by notice served on or after 16th September 2002 by a limited partner mentioned in subsection (1)(b) ...

subsection (6) applies subject to subsection (4).

(4) Subsection (6) does not apply if- ...

(a) the conditions mentioned in subsection (5) are met; or

(b) the Land Court makes an order under subsection (8).

(5) For the purposes of subsections (2) and (4)(a), the conditions are-

(a) that-

(i) a (or the) notice of dissolution of the partnership has been (or was) served before 4th February 2003 by a limited partner mentioned in subsection (1)(b); and

(ii) the partnership has been dissolved in accordance with the notice; and

(b) that the land comprised in the lease-

(i) has been transferred or let;

(ii) under missives concluded before 7th March 2003, is to be transferred; or

(iii) under a lease entered into before

that date, is to be let,

to any person.

(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 a joint tenant) under the tenancy in the partner's own right.

(7) Where-

(a) a tenancy continues to have effect by virtue of subsection (6); and

(b) the-

(i) notice mentioned in paragraph (a) of subsection (3) was served before the relevant date; or

(ii) thing mentioned in paragraph (b) or (c) of that subsection occurred before that date,

the landlord may, within the relevant period, apply to the Land Court for an order under subsection (8).

(8) An order under this subsection-

(a) is an order that subsection (6) does not apply; and

(b) has effect as if that subsection never applied.

(9) The Land Court is to make such an order if (but only if) it is satisfied that-

(a) the-

(i) notice mentioned in paragraph (a) of subsection (3) was served otherwise than for the purposes of depriving any general partner of any right deriving from this section; or

(ii) thing mentioned in paragraph (b) or (c) of that subsection occurred otherwise for that purpose; and

(b) it is reasonable to make the order.

(10) Where-

(a) a tenancy continues to have effect by virtue of subsection (6); and

(b) the-

(i) notice mentioned in paragraph (a) of subsection (3) was served on or after the relevant date; or

(ii) thing mentioned in paragraph (b) or (c) of that subsection occurred on or after that date,

section 73 applies.

(11) For the purposes of-

(a) subsections (7) and (10), the relevant date is such date as the Scottish Ministers may by order specify; and

(b) subsection (7), the relevant period is the period from the relevant date to such date as they may so specify ..."

The relevant date is 1 July 2003. The relevant period ended on 29 July 2003 or on the date 28 days after the general partner gave notice under section 72(6), whichever was the later (Agricultural Holdings (Relevant Date and Relevant Period) (Scotland) Order 2003 (SSI No 294)).

[40] Section 72 therefore applies to pre-existing 1991 Act tenancies that were granted to limited partnerships. Its effect is that where the landlord dissolves such a partnership the general partner is given a 1991 Act tenancy, provided that the general partner gives the appropriate notice (s 72(6), (7)) and the landlord does not obtain an order of the Land Court under section 72(8).

Section 73

[41] Section 73 applies inter alia where the tenancy continues to have effect by virtue of section 72(6) (s 72(10)(a)) and the landlord serves notice of dissolution on or after the relevant date, that is to say on or after 1 July 2003. It provides as follows:

"(1) Where this section applies, subsections (1) to (3) and (5) of section 21 (notice to quit and notice of intention to quit) of the 1991 Act do not apply in relation to the bringing of the tenancy to an end by the landlord.

(2) Subsections (4), (6) and (7) of that section apply in relation to subsections (3) to (5) as they apply in relation to subsections (1) to (3) and (5) of that section.

(3) The tenancy may be brought to an end by the landlord if the landlord gives a notice under this subsection to the tenant.

(4) Subject to subsection (7), a notice under subsection (3) must-

(a) be in writing and state that the tenant shall quit the land on the expiry of the stipulated endurance of the lease constituting the tenancy (or, where the lease has continued in force by tacit relocation, on the expiry of a period of continuation); and

(b) be given not less than one year nor more than two years before the expiry of the stipulated endurance of the lease (or expiry of the period of continuation), provided that not less than 90 days have elapsed from the date on which the intimation mentioned in subsection (5) is given.

(5) Subject to subsection (7), a notice under subsection (3) is of no effect unless the landlord has given written intimation of the landlord's intention to terminate the tenancy to the tenant not less than two years nor more than three years before the expiry of the stipulated endurance of the lease (or expiry of the period of continuation).

(6) The landlord may apply to the Land Court for an order under subsection (7).

(7) An order under this subsection is an order that, instead of the periods of time mentioned in subsections (4) and (5), such shorter periods as the Land Court may specify are to apply.

(8) The Land Court is to make such an order if (but only if) it is satisfied
that-

(a) service of the notice mentioned in paragraph (a) of subsection (3) of section 72, or the thing mentioned in paragraph (b) or (c) of that subsection, occurred otherwise than for the purposes of depriving the tenant (being then a general partner) of any right deriving from section 72; and

(b) it is reasonable to make the order."

[42] Section 73 therefore enables the landlord to terminate the tenancy by giving a notice of intention to terminate not less than two years and not more than three years before the expiry of the stipulated endurance of the lease or of a period of relocation (s 73(4), (5)) and serves notice to quit not less than one year and not more than two years before that date (s 73(3), (4)); but always not less than 90 days after the service of the notice of intention to terminate.

[43] As the Land Court has described (Note, para [62]), under sections 70, 72 and 73 there are four possible situations; namely

(1) Where the contract of limited partnership is for a fixed period and the contract provides that it will terminate automatically at the end of that period without the need for any notice of dissolution. In this case the limited partnership and the lease to the limited partnership are unaffected by the provisions of sections 72 and 73. When the partnership comes to an end automatically, the lease also comes to an end.

(2) Where notice is required and is given before 16 September 2002. In this case the notice of dissolution is not affected by section 72 or section 73. Accordingly the limited partnership is validly dissolved and the lease is brought to an end. In this case it is of no consequence when the dissolution takes effect.

(3) Where notice is given between 16 September 2002 and 30 June 2003. In this case, if the general partner gives the appropriate notice, the tenancy in favour of the limited partnership becomes vested in him unless on the application of the landlord the Land Court makes an order under section 72(8). If such an order is not made, the contractual rights and obligations of the parties are overridden and the general partner is given a 1991 Act tenancy with all that that entails. That is the situation with which this case is concerned.

(4) Where notice of dissolution of the partnership is given on or after 1 July 2003. In this case the general partner acquires a 1991 Act tenancy but is vulnerable to an incontestable notice to quit served by the landlord in accordance with the provisions of section 73(4) and (5).

An overview

[44] Before I consider the relevant provisions in detail, I shall set them in their context. The starting point is that a lease to a limited partnership created a valid tenancy of an agricultural holding in favour of the partnership. Therefore, formally at least, the partnership enjoyed all of the protections that the Agricultural Holdings (Scotland) Acts conferred. However, such tenancies were de facto a form of limited duration tenancy.

[45] The 2003 Act was a response to the effect of the 1948, 1949 and 1991 Acts in restricting the supply of agricultural land for letting. It recognised the reality of limited duration tenancies in the marketplace. The professed aim of the legislation was to revitalise the tenanted sector by making it lawful to let land to an individual for a fixed term by means of either of the new forms of limited duration tenancy and, in association with that, to prevent the inadvertent creation of new 1991 Act tenancies. The provisions of Part 6 of the Act therefore made it pointless for a landlord to grant a new tenancy to a partnership.

[46] However, the Parliament went back on the understanding given in the White Paper, and confirmed by the Bill as presented, in relation to existing limited partnership lets. Instead of leaving them unaffected, it affected them fundamentally. It retrospectively penalised the actions of landlords who had dissolved existing partnerships in the belief that the legislation would not affect them.

The proceedings in the Land Court
The application

[47] The landlord's notice was plainly caught by section 72(3) with the result that the general partner's notice took effect unless the landlord could obtain an order from the Land Court under section 72(8). The landlord thereupon applied to the Land Court for such an order and for removing of the respondents.

[48] The landlord avers that when he bought Peaston he intended that when the tenancy came to an end he would amalgamate Peaston with the adjacent farm of Whitburgh and part of the nearby farm of Windymains and Keeper Glen, both of which he owned and had in hand, and farm them as one unit; and that he had expected that he would obtain vacant possession of Peaston on 28 November 2008. These averments, in my view, are crucial. He avers that when amendment 169 (supra) was published, he took it to mean that any notice of dissolution of a limited partnership served on or after 4 February 2003 would not terminate the tenancy if the Land Court made an order of the kind then proposed, and that therefore on 3 February 2003 the limited partner gave the notice of dissolution.

The issues

[49] The short issues before the Land Court were (1) whether the notice of dissolution had been "served otherwise than for the purposes of depriving any general partner of any right deriving from" section 72 (s 72(9)(a)(i), supra); and (2) if so, whether it was reasonable for the Land Court to make the order applied for (s 72(9)(b), supra). The parties agreed that if the notice had not been served otherwise than for such purposes, the respondents had become tenants in their own right in terms of section 72(6). The solicitor who then represented the appellant gave notice to the Court that he did not take any point regarding the appellant's Convention rights (cf Note, at para [8]).

The decision

[50] The Land Court held that the appellant had failed to satisfy the requirements of section 72(9)(i)(a). The respondents' right to remain in occupation of the subjects after the dissolution of the partnership was a right deriving from section 72 (Note, paras [53], [70]). It was not disputed that the decision to give the notice of dissolution had been triggered by the publication on 3 February 2003 of the proposed amendments to the Bill. The inevitable conclusion was that the main purpose of the notice had been to avoid the risk that a provision in the new Act would prevent the appellant from terminating the tenancy on 28 November 2008. Although section 72 was not in force when the notice of dissolution was served, there was no material distinction between an attempt to avoid the risk that a provision would be enacted and an attempt to avoid the effects of its being enacted.

[51] The Land Court reached this conclusion with regret (para [53]). On 3 February 2003 the appellant had had the right to recover possession on the agreed date; but because of the retrospective effect of the Act the respondents now had security of tenure. It observed that, when contrasted with the case under section 73 where the notice was given after 1 July 2003, the effect of section 72 could be regarded as penal (para [71]).

[52] The Land Court therefore refused the application. That is the decision appealed against.

The appeal

[53] The appeal was brought solely on the construction of section 72. After it was lodged the appellant instructed other solicitors. On their advice he sought leave to add a new ground of appeal to the effect that if section 72 was to be construed as the Land Court had construed it, it was contrary to his Convention rights; and that if it could not be read in a way that was compatible with the Convention, it was outwith the legislative competence of the Scottish Parliament. It seemed to us that the point was important and that it was in the interests of justice that the appellant should be allowed to take it. We therefore admitted the new ground of appeal.

Submissions for the appellant

[54] Counsel for the appellant submitted that "purposes" in section 72(9)(a) had to be construed narrowly. The purpose for which a notice was served had to be distinguished from its consequences or effects. "Deriving from" had to be read in context. A general partner's rights under section 72(6) were rights conferred by and not deriving from the section. A notice could not have as its purpose the deprivation of statutory rights that did not yet exist. On the Land Court's analysis, the purpose of serving a notice would always be to deprive the general partner of rights deriving from section 72. That would deprive section 72(9) of content. The appellant was entitled to enquiry on his averments that his purpose in serving the notice had been the fulfilment of his plan of amalgamation.

[55] In any event, section 72 was not a legitimate anti-avoidance measure. It was punitive. It affected property rights. It materially reduced the capital value of the holding and the landlord's control and use of the land. It deprived him of the contractual right to terminate the partnership and with it the lease, and materially interfered with his peaceful enjoyment of the land by burdening it indefinitely with a secure tenancy (Gauci v Malta, (2011) 52 EHRR 25; Wilson v First County Trust Ltd (No 2) [2004] 1AC 816). Article 1 of the First Protocol was engaged. Section 72 was also arbitrary (Antonetto v Italy (2003) 36 EHRR 10). It affected one category of landlords without justification and burdened them with the very type of tenancy that the Parliament recognised to be no longer appropriate. Whatever legitimate aim existed to justify interference with limited partnerships, the Parliament considered that the aim was achieved for some tenancies through the less burdensome measures imposed by section 73. The separate provision in section 72(6) was unnecessary. In all, section 72 imposed a disproportionate and excessive burden on the appellant and had no objective justification. It had no legitimate aim and was not reasonably related to the broader aims of the Act (Gauci v Malta, supra; J A Pye (Oxford) Ltd v United Kingdom, (2008) 46 EHRR 45). Article 14 was also engaged. The different treatment accorded to the appellant when compared with other landlords who served notice outwith the period in question, constituted discrimination on the grounds of status. It had no reasonable foundation (Clift v United Kingdom, Application 7205/07, 13 July 2010; Larkos v Cyprus (2000) 30 EHRR 597).

Submissions for the respondents

[56] Counsel for the respondents submitted that section 72 was intended to address the mischief of the use of limited partnerships to avoid security of tenure under the 1991 Act. Special provision had been required for existing tenancies. The Parliament could have applied section 70 of the Act, which for future tenancies enabled a partner to continue as tenant in his own right on the termination of the partnership, to all tenancies irrespective of their date. Instead it chose a retrospective but less draconian approach. The retrospectivity of section 72 was limited. The start date was only six months before the Bill was passed. Since the landlord could terminate the tenancy under section 73 without recourse to the Land Court, section 72 provided a disincentive to a landlord from serving notice of dissolution during the passage of the Bill, even if the notice was served before the section was introduced. This was justified by the flurry of notices served just before 4 February 2003. The landlord could apply to the Land Court if service of the notice had been motivated other than by a desire to avoid the impending legislation. The words "depriving any general partner of any right deriving from this section" covered rights conferred by section 72 and rights resulting from it. One such right was the general partner's right to serve a notice under section 72(6). If one of the landlord's purposes had been to deprive the general partner of that right, the Land Court could not make an order under section 72(9), even if the notice pre-dated the passing of the Bill. To look simply at the effects of the notice would deprive section 72(9)(a)(i) of content. The Land Court had been entitled without enquiry to hold that the appellant could not discharge the onus upon him.

[57] Article 1 of the First Protocol was engaged but the state had a wide margin of appreciation. Section 72 was lawful, in the sense that it had been introduced by due process of law (Antonetto v Italy, supra; Gauci v Malta, supra). It pursued the legitimate aims of regulating the effect of existing tenancies involving limited partnerships and mitigating their harmful effects. A challenge could succeed only if the measure was manifestly without foundation (Gauci v Malta, supra). Section 72 was proportionate and struck a fair balance. There were rational reasons for treating landlords differently according to the date on which they gave notice. It affected only those landlords who served notice within a narrow window of time. It did not confer automatic rights because the general partner was required to serve notice under section 72(6). It had limited effect. The landlord was left with a tenant on the same terms as he had agreed previously; and he could apply to the Land Court for relief. A hard result did not make it disproportionate (Wilson v First County Trust Ltd (No 2), supra); nor did the availability of alternative anti-avoidance measures. The state's judgment could be interfered with only if it was irrational or unreasonable. Article 14 was concerned with matters of status, and was not engaged here.

Submissions for the intervener

[58] Counsel for the Lord Advocate submitted that section 72 should be read as narrowly as was required for it to be within the Parliament's competence, if such a reading was possible (Scotland Act 1998, s 101). The section dealt with the mischief of the widespread use of limited partnership tenancies, which had caused insecurity to tenants. Section 72 operated purely as an anti-avoidance measure. The service of notices during the Bill's passage had created uncertainty. It was legitimate for the legislature to inform itself of this and to consider whether legislation could prevent or discourage the service of further notices. It applied only in limited circumstances and within strict time frames. Article 1 of the First Protocol was therefore not engaged. The section did not deprive the landlord of his possessions. It did not interfere with his peaceful enjoyment of them or control their use. If it did, it was proportionate and justified. It pursued a legitimate aim in the public interest. When parties entered into a contract they accepted the risk that the law might change (Axa General Insurance Ltd, Petr 2010 SLT 179, now affd 2011 SC 662 (IH); 2011 SLT 1061 (SC)). The degree of anxious scrutiny required was less than for other Convention rights. The test was whether it was manifestly without reasonable foundation (James v United Kingdom (1986) 8 EHRR 123). A retrospective measure could be compatible with article 1 (National and Provincial Building Society v United Kingdom (1997) 25 EHRR 127; Mellacher v Austria (1989) 12 EHRR 391). The state was allowed a wide margin of discretion (Gasus Dosier und Fordertechnik GmbH v The Netherlands (1995) 20 EHRR 403). The mischief could have been dealt with in other ways; but that was not conclusive. The legislature had not adopted a broad brush approach. Termination of the partnership remained possible, where appropriate. Article 14 was concerned with different treatment by reason of personal characteristics, and was not engaged here (Lancashire CC v Taylor (Secretary of State for the Environment, etc intervening) [2005] 1 WLR 2668). The court should not grant any remedy without having regard to the possibility of further uncertainty that might ensue and its effect on the rights of others.

Conclusions

[59] In my opinion, there are four questions in this case, namely:

(1) If all Convention-related questions are disregarded, what is the true construction of section 72(9)?

(2) In any event, is section 72 Convention-compliant?

(3) If it is not, is there a construction of it that would avoid incompatibility?

(4) If there is not, what is the appropriate remedy?

(1) The proper construction of section 72(9) (ECHR being disregarded)

[60] In my opinion, we should begin by interpreting section 72 according to the ordinary canons of construction and without regard to the Human Rights Act 1998 (s 3; cf R (Waddle) v Crown Court at Leeds [2002] 1 AC 754, at para [79]) or the Scotland Act 1998 (s 102).

[61] Section 72 is not a model of draftsmanship either in structure or in expression. The first question that it raises is whether a notice served during the relevant period could have been served "for the purposes of depriving any general partner of any right deriving from this section" (s 72(9)(a)(i)). Between 16 September 2002 and 22 April 2003 there was no such section. It is absurd to suggest that a landlord's purpose in serving notice of dissolution during that period could be to deprive a general partner of a right that he did not have. On a literal reading, section 72(9)(a)(i) would be of no effect for most of the period to which section 72 is expressed to apply. The court must therefore try to find a reading that will give it some effect (Bennion, Statutory Interpretation: A Code, 5th ed, ss 155 and 198).

[62] In my opinion, the inept reference to a "right deriving from this section" must be read as including a right of the kind conferred by section 72 that might be derived from a provision in the new Act.

[63] The second question that arises, in my view, is what is meant by a right "deriving from" section 72. The fact that the draftsman did not use the expression "conferred by," which is used elsewhere (ss 12(9), 27(1)(g), 70(3), 72(2)), suggests to me that "deriving from" was intended to cover not only rights expressly conferred on the general partner by section 72 but rights accruing to him in consequence of the 1991 Act tenancy conferred on him by section 72(6): that is to say, the rights conferred by the 1991 Act itself and by related legislation.

[64] The third question is, I think, the question on which this appeal can be decided, namely what is meant by "the purposes" for which the notice of dissolution was served. In every case in which the landlord serves a notice of dissolution of the partnership, his immediate and obvious purpose is to bring the tenancy to an end and with it all rights and interests that the general partner may have in relation to the subjects. It could be argued, therefore, that every notice of dissolution given in the period referred to in section 72 was given for the purposes specified in section 72(9)(a)(i). On that interpretation section 72(9) would be meaningless.

[65] In my view, to give content to section 72(9)(a), the court must 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. That approach seems to be implied in the statement of the Deputy Minister at Stage 2 in support of amendment 169 (supra) when he spoke of the landlord's having "legitimate reasons" for wishing to dissolve a partnership and appeared to suggest that there could be one such reason where the landlord wished to enter into a limited duration tenancy with the general partner. It is also implied in the statement of the Deputy Minister where he distinguished between notices served for a "questionable reason" or "as a response to uncertainty about the contents of the bill" (col 16316, supra) and "legitimate" notices of dissolution that were "unrelated to any attempt by the landlord to obviate the impact of the Bill" (col 16317, supra).

[66] In my opinion, a purpose other than that to which section 72(9)(a)(i) refers would exist where the landlord served the 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. In such a case it would be open to the landlord to show that even if the timing of the notice was prompted by the proposed legislation, his purpose to end the tenancy was not.

[67] The true characterisation of a landlord's purpose in serving a notice of dissolution of the partnership will depend on the facts and circumstances and will therefore have to be resolved after proof.

[68] I conclude therefore that the Land Court erred in dismissing the application. The landlord avers in essence that his purpose to end the tenancy at Martinmas 2008 as part of a plan of amalgamation was formed when he bought Peaston in 1998. In my opinion, the landlord was entitled to a proof of his averments on this issue and, if he proved them, would have made out his case under section 72(9)(a)(i). Whether it was then reasonable to grant the order sought (s 72(9)(b)) would have been a matter for the Land Court to decide on a consideration of the whole facts and circumstances.

(2) Is section 72 Convention-compliant?
The significance of the issue

[69] If I am right in the view that I have reached on the interpretation of section 72, that is sufficient to dispose of this appeal. On that view, the Convention questions are otiose. Nevertheless they are not academic. The landlord may fail to prove his case under section 72(9)(a)(i) or, having proved it, he may fail to satisfy the Land Court on the reasonableness test under section 72(9)(b). In either event, the Convention arguments will become decisive. In a real sense the Convention-based questions remain alive. Since a decision on these questions could make further procedure in the Land Court unnecessary, and since the questions are of such general importance, they are better considered sooner rather than later.

[70] In submitting that section 72 of the 2003 Act is incompatible with his Convention rights and is therefore outwith legislative competence (Scotland Act 1998, s 29(2)(d)), the appellant relies on article 1 of Protocol 1 and article 14.

Article 1

[71] Article 1 of Protocol 1 is in the following terms:

"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."

The tenants agree that this article is engaged. The Lord Advocate contends that it is not.

[72] It is not in dispute that when agricultural land is burdened with a 1991 Act tenancy, the value of the landlord's interest is materially reduced (Baird's Exrs v IRC, supra). Nor is it disputed that the landlord is deprived of inter alia all rights of possession of his land and has only a limited right of access to it for the purposes of inspection (1991 Act, s 10). The effect of section 72 is to nullify the landlord's contractual rights under the partnership and the lease without compensation, and to burden him with a tenancy that he has only the most limited powers to terminate. He thereby incurs serious contingent liabilities towards the tenant and suffers an immediate capital loss. Section 72 imposes these consequences retrospectively.

[73] The case law of the Strasbourg Court establishes that restrictions on a landlord's right to terminate a lease and recover possession amount to a control of the use of property within the meaning of article 1, paragraph 2 (Barreto v Portugal, 21 Nov 1995, at para [35]; Spadea v Italy (1996) 21 EHRR 482, at [28]; Gauci v Malta, supra, para [52]). In my view, this article is engaged. The question then is whether the article 1 guarantee has been violated, either alone or in conjunction with article 14.

[74] Counsel for the Lord Advocate submitted that the legislation as whole was intended to balance security of tenure for tenants with freedom of land use for landlords. In furtherance of that, the Act prevented the use of new limited partnerships to circumvent the provisions of the 1991 Act. Section 72 was directed at landlords who tried to avoid the expected effects of the new legislation. Measures to confer security of tenure on tenants might be legitimate in the context of social housing (Gauci, supra [54]). More generally, a measure might, in pursuance of legitimate social, economic or other policies, be in the public interest even if the community at large had no direct use or enjoyment of the property affected (James v United Kingdom, supra, at [41], [45]).

[75] In my opinion, the conferment of security of tenure on tenant farmers is a social or economic policy that can be pursued in the general interest. Such a policy can be pursued even where it involves rewriting settled bargains (Bäck v Finland (2005) 40 EHRR 1184 at para [68]; Mellacher v Austria (1989) 12 EHRR 391, at para [51]). The retrospective prohibition of a legal device to circumvent an enactment, such as a tax avoidance loophole, may be permissible in the general interest (Huitson v HMRC [2011] EWCA Civ 893). That principle, in my view, could apply to a measure directed against steps taken to frustrate the purpose of an expected legislative provision. I therefore accept that the 2003 Act as a whole pursues measures in the general interest. I also accept that the inclusion of retrospective anti-avoidance measures in the 2003 Act could serve a legitimate general interest.

[76] But to determine whether the measures taken in section 72 were justified we have to consider in what way section 72 serves the general interest and whether it is appropriate and proportionate.

[77] The protection given by article 1 of Protocol 1 is limited; but the State's purposes in interfering with property are not on that account immune from scrutiny. In James v United Kingdom (supra) the Strasbourg Court considered whether the relevant measure was "appropriate in achieving its aim" and whether it was proportionate (at para [50]); that is to say, whether the justification advanced for the measure was "manifestly without reasonable foundation" or "manifestly unreasonable" (James v United Kingdom, supra, at paras [46], [49]; Axa General Insurance Ltd, Petr, 2011 SLT 1061 (SC), at paras [33], [125]). That implies that the legislature has a broad area of discretion in its judgment as to social policy.

[78] The means that the measure adopts will not be disproportionate simply because, by reason of alternative and arguably better solutions, they are not strictly necessary (James v United Kingdom, supra, at para [51]; cf Axa General Insurance Ltd, Petr, supra, at para [130]; cf also Mellacher v Austria, supra, at para [53]; Blečić v Croatia (2005) 41 EHRR 13, at para [67]). The discretion of the legislature extends also to deciding whether the adverse consequences of the measure are outweighed by its purposes (AGOSI v United Kingdom (1987) 9 EHRR 1, at para [52]; J A Pye (Oxford) Ltd v United Kingdom (2008) 46 EHRR 45, at para [55]).

[79] In considering these matters we should not look simply at the justification of the legislation in general. We have to examine the provision and how it is applied. So the question is whether section 72, in its application to notices served between 16 September 2002 and 30 June 2003, is an appropriate and proportionate means of preventing avoidance of the new provisions favouring the position of the general partner. That question cannot be seen apart from section 73, which provides for consequences that are more favourable to the landlord who serves notice of dissolution on or after 1 July 2003 (s 72(10)).

The Lord Advocate's proposed justification

[80] I proceed initially on the basis that section 72 was enacted purely as an anti-avoidance measure. On that basis, section 72 is inappropriate, in my view, because of its excessive effect and its arbitrary scope. A classic anti-avoidance measure simply nullifies the benefit gained by the avoiding action. Section 72 operates altogether differently.

Excessive consequences of section 72

[81] Despite the lawfulness of the landlord's action, the consequence of section 72, if the landlord should fail to obtain an order of the Land Court under section 72(9), is that the general partner, who is not a party to the lease, is given a 1991 Act tenancy of the holding. Therefore the landlord suffers all of the consequences that I have described in this and other cases and need not repeat (cf paras [7]-[8] supra; Morrison-Low v Paterson's Exrs, 2012 CSIH 10; Loudon v Hamilton 2011 SC 255, at paras [12]-[15]), and is exposed to the tenant's contingent right to buy.

[82] In this way the Parliament conferred on the general partner a form of tenancy the creation of which section 1 of the 2003 Act was designed to restrict and a form of tenancy that had caused the problems that the 2003 Act sought to cure. The Parliament could have furthered the same end in a less drastic way; for example, by providing that any notice of dissolution served in the period in question was to be of no effect; by providing that the general partner was to be given one of the new forms of limited duration tenancy; or by providing that the consequences set out in section 73 would follow.

Contrast with the consequences of applying section 73

[83] The position of the landlord on whose land a 1991 Act tenancy is imposed by section 72 should be contrasted with that of the landlord who serves notice of dissolution on or after 1 July 2003. In that case the landlord has the opportunity to bring the tenancy of the former general partner to an end by an incontestable notice to quit served in accordance with section 73 (supra). That would appear on the face of it to be an unreasonable discrimination against landlords who served notice of dissolution in the period to which section 72 applies.

[84] Separately, section 72 is arbitrary because it affects all notices of dissolution in the period from 16 September 2002 to 30 June 2003, no matter how long the period of notice was. It is therefore possible that a notice of dissolution could cause the partnership, and therefore the tenancy, to come to an end at a date that was later than the date on which a landlord who served notice of dissolution after 1 July 2003 could bring the resulting tenancy of the general partner to an end by notice to quit under section 73. In the present case, for example, the landlord's notice of dissolution gave the general partner almost five years and ten months notice of the dissolution.

[85] In my view, section 72 is also arbitrary because it continues to apply for what appears to be a random period of one month and eight days from the coming into force of the section to the coming into force of section 73.

Other justifications for section 72 offered to Parliament

[86] If anti-avoidance in the classic sense was the only justification of section 72, then it is clear, in my view, that the interference with property posed by section 72 would be unjustifiable. I therefore turn to consider whether an alternative justification can be found.

[87] It is appropriate, in my opinion, to consider the justification that was offered to the Parliament for the provisions of section 72. The justification is to be found in the speeches of the Deputy Minister in the debates at Stages 2 and 3 of the Bill's passage.

[88] The first major issue was the justification for the enfranchisement of an existing general partner, namely that a general partner deserved protection from the dissolution of the partnership (cf col 4164, 4 February 2003, supra). It was never explained why a general partner in such a case should require to be protected from the consequences of the dissolution of an existing and lawful contract.

[89] Ex hypothesi any notice of dissolution to which section 72 applies was served in accordance with the partnership contract. Therefore any landlord who served such a notice in the relevant period was enforcing a contract freely entered into at arms' length by two parties experienced in agriculture and in commerce. The landlord therefore brought about a result that had been contracted for by the parties under a contractual arrangement that, as this court held, was lawful per se (MacFarlane v Falfield Investments Ltd, supra). The adequacy of that justification was not put in issue in this appeal.

[90] A related justification is to be found in the words of the Deputy Minister in support of amendment 111 on which section 72 is based. In my view, the inclusion of section 72 was essentially a retaliatory act based on the Ministerial view that dissolutions effected in anticipation of the legislation were "immoral." The conclusion is irresistible, in my view, that the provisions of section 72 were essentially punitive.

[91] I can find no intellectual justification in any of the Deputy Minister's words for the proposition that it was immoral for a landlord to bring about a result that the general partner had contracted for. Furthermore, in the speech in which he described such an action as immoral the Deputy Minister also referred inaccurately to the dissolutions that had occurred "pending the final shape of this legislation." He said

"That attempt by landlords to protect their position put the general partners in a situation of great uncertainty and faced them with the threat of imminent eviction" (col 16315, supra).

That seems to me to be contrary to the facts. Since the notice in each such case was served exactly in accordance with the partnership contract, I cannot see how it put the general partner in any situation of uncertainty. Moreover, the reference to "imminent eviction" was misleading and, in the context of Scottish agricultural history, emotive. Eviction was a complete misdescription of the process by which, through the dissolution of the tenant, the tenancy came to an end.

[92] I am also of the view that in the course of a speech that referred to the landlords' actions as immoral, no principled justification was advanced by the Deputy Minister for legislation that struck at notices of dissolution served at a time within the relevant period when landlords had been assured expressly in the White Paper, and impliedly in the draft Bill and the Bill as presented, that existing limited partnership leases would not be affected by the proposed legislation.

[93] Even if a landlord had become aware of the Minister's letter of 19 November 2002 (supra), he would have not have assumed that the Bill would be extended to existing leases. At that stage it was no more than an option to which the Minister had not yet closed his mind. Although an unspecified number of "tenant farmers," by which he may have meant general partners, had urged him to take that course, the Minister recognised that the consultation on the draft Bill had not revealed much support for the idea.

[94] The matter remained on that footing until 3 February when amendment 169 was published. That amendment did affect existing tenancies; but only where notice of dissolution was served in the period from 4 February 2003 to the relevant date, which was unspecified at that stage. It is therefore clear, in my opinion, that any landlord who served notice of dissolution between 16 September 2002 and 3 February 2003 had no cause to fear that his action would be affected by any provision of the forthcoming legislation.

[95] The landlord's acts were lawful under the existing law and would have been unaffected by the proposals for law reform that were current at the time. I can see no reason why the actions of the landlord in serving notice of dissolution during the period concerned were deserving of any form of penalisation.

The Deputy Minister's suggestion that a notice of dissolution affected by section 72 could be withdrawn

[96] It may be that the Parliament thought that landlords could avoid the consequences of section 72 by withdrawing notices served during the relevant period (cf Land Court's Note, para [71]). The Deputy Minister referred to his own aspiration that there should be industry agreement on this point (12 March 2003, col 16327). On this view, section 72 effectively would operate as a temporary stop-gap. If that was a consideration that influenced the Parliament in passing section 72, it was based on a misunderstanding. A notice of dissolution to which section 72 applied could not be withdrawn unilaterally since service of the notice triggered the general partner's rights. The appellant's attempt to do so in this case was rejected by the respondents (Land Court's Note, para [6]). In my opinion, section 72 cannot be salvaged on this basis.

Conclusions

[97] Whatever justification there was for interfering with limited partnerships, Parliament apparently considered that for notices given after 30 June 2003, section 73 was adequate. I am unable to find any convincing justification for the differential treatment of landlords in section 72 and 73. No justification was offered by the Lord Advocate for the differential treatment. I cannot see how section 72 pursues an aim that is reasonably related to the overall aims of the legislation.

[98] I conclude therefore that the appellant's rights under Protocol 1, article 1 would be violated if section 72, as I have construed it, were to be applied to him.

Article 14

[99] In terms of Article 14, in my view, the difference in treatment between landlords serving notices before 1 July and on or after 1 July does not amount to discrimination on the grounds of status. The differing timing of their conduct cannot amount to discrimination on the ground of a personal characteristic. The differing treatment is relevant to whether the interference with the control of property under article 1 was justified. But the argument on article 14 adds nothing to the appellant's case under article 1.

(3) Is there a construction of section 72 that would avoid incompatibility with ECHR?

[100] The Human Rights Act 1998 provides:

"3.- Interpretation of legislation.

(1) So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights ... "

An Act of the Scottish Parliament is "subordinate legislation" (ibid, s 21(1).

[101] The Scotland Act 1998 provides:

"101.- Interpretation of Acts of the Scottish Parliament etc

(1) This section applies to-

(a) any provision of an Act of the Scottish Parliament ...

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

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

[102] Even allowing for the strength of the obligation contained in section 3 of the Human Rights Act, I do not think that section 72(9) can be interpreted in such a way as to make it Convention-compliant. The problem that I have identified with section 72 arises from the harsh consequences to landlords that are prescribed for pre-1 July notices in comparison with the consequences of notices served on or after that date. I cannot see any way in which section 72 could be read so as to remove this comparative inequity of treatment.

[103] I conclude therefore that we should find that section 72 can be read only in a way that is incompatible with the Convention and is therefore, to some extent, outwith legislative competence.

(4) The appropriate remedy

[104] The Scotland Act 1998 provides:

"29.- Legislative competence

(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 ...

102.- Powers of courts or tribunals to vary retrospective decisions

(1) This section applies where any court ... decides that-

(a) an Act of the Scottish Parliament or any provision of such an Act is not within the legislative competence of the Parliament ...

(2) The court or tribunal may make an order-

(a) removing or limiting any retrospective effect of the decision, or

(b) suspending the effect of the decision for any period and on any conditions to allow the defect to be corrected.

(3) In deciding whether to make an order under this section, the court or tribunal shall (among other things) have regard to the extent to which persons who are not parties to the proceedings would otherwise be adversely affected ..."

[105] We were not fully addressed on the question of remedy. If I am right in the conclusions that I have expressed on the Convention-related aspects of section 72, two further questions arise; namely (1) the means of severance of the offending parts of the legislation, if severance is possible; and (2) the orders, if any, that the court should make to deal with the consequences. It will be necessary that we should hear counsel on these matters.

[106] Since this could be an appropriate case for our making an order under section 102 of the Scotland Act 1998, I propose that we should order intimation of the proceedings to date to the Advocate General for Scotland.

Disposal

[107] I propose to your Lordships that we should allow the appeal and recall the Order of the Land Court; and make a finding that the appellant's rights under Protocol 1, article 1 are violated by section 72 of the 2003 Act. I propose that in consequence of that finding, we should order intimation to the Advocate General so that he can intervene, if so advised (Scotland Act 1998, s 102(4),(7)); and that we should continue the appeal for a hearing on the question of the remedy and of the possible application of section 102 of the Scotland Act. Since the constitutional question now overhangs this case, I propose that ad interim we should not return it to the Land Court for further procedure.

SECOND DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lord Osborne Lord Nimmo Smith	[2012] CSIH 26 XA107/10 OPINION OF LORD OSBORNE in the appeal by ALASTAIR ERIC HOTSON SALVESEN Landlord and Appellant; against JOHN RIDDELL and ANDREW RIDDELL Tenants and Respondents: and THE LORD ADVOCATE Intervener _______

For the landlord and appellant: Reid QC; Gillespie Macandrew LLP

For the tenants and respondents: Ellis QC; Balfour & Manson

For the Intervener: Mure QC; Scottish Government Legal Directorate

15 March 2012

[108] I agree with the Opinion of your Lordship in the chair and have nothing to add.

SECOND DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lord Osborne Lord Nimmo Smith	[2012] CSIH 26 XA107/10 OPINION OF LORD NIMMO SMITH in the appeal by ALASTAIR ERIC HOTSON SALVESEN Landlord and Appellant; against JOHN RIDDELL and ANDREW RIDDELL Tenants and Respondents: and THE LORD ADVOCATE Intervener _______

For the landlord and appellant: Reid QC; Gillespie Macandrew LLP

For the tenants and respondents: Ellis QC; Balfour & Manson

For the Intervener: Mure QC; Scottish Government Legal Directorate

15 March 2012

[109] I agree with the Opinion of your Lordship in the chair and have nothing to add.