Court of Session rules on Salvesen v Riddell Remedial Order and Compensation

The Outer House of the Court of Session published its decision on McMaster and Others v Scottish Ministers [2017] CSOH 46 yesterday.

Background

The decisionsets outthe background to the case and the relevant provisions of the Agricultural Holdings (Scotland) Act 2003 and the Agricultural Holdings (Scotland) Act 2003 Remedial Order 2014.

However, to give a quick summary here,the case was raised by a group of tenants who had acquired security of tenure by the provision of the 2003 Act which was declared to be outwith the competence of the Scottish Parliament in the case of Salvesen v Riddell.

Following the enactment of the Remedial Order (enactedto remedy defects under Article 1 ofProtocol 1 to the European Convention on Human Rights ("A1P1") which the Supreme Court identifiedin the 2003 Act),those tenants no longer had security of tenure. The tenants raised the case on the basis that their property rights under A1P1 had themselves been violated because the Remedial Order didnot make provision for compensation.

The Court's decision

Whilst weare all still digesting the decision, we note that the Court ruled the following:

• • The Remedial Order itself did not violate the property rights of the tenants because it was within the discretion of the Scottish Parliament to leave the question of compensation to be determined by the Scottish Ministers on a case-by-case basis (rather than to create a specific scheme in the legislation).
  • Claims based solely on the consequences of the termination of the tenancy or on a reduction in the value of the tenancy should be rejected, as the tenants could not claim to have suffered detriment where the 2003 Act had temporarily (but unlawfully) put them in a more advantageous position viz a viz termination and value than they would have been in otherwise.
  • The Court did, however, establish a number of principles to be applied in order to determine whether compensation should be payable to any particular tenant:
    • Compensation would be payable in respect of direct losses incurred by the general partner solely as a result of reasonable reliance onhaving a secure tenancy.
    • Compensation would be payable in respect of inconvenience and frustration (albeit set off against the benefit of having enjoyed an extended tenancy as a result of the unlawful provision of the 2003 Act).
  • Only the general partner under the original (pre-2003 Act) tenancy would be entitled to make a claim - family members and others associated with the farming business could not.

The Court did not rule on whether compensation was actually due to any tenants - it only set out the principles on which compensation could and could not be awarded. Further court proceedings will therefore be required to determine whether compensation will be payable in any given case.

If you have any queries on the case or any other agricultural holdings matter, please get in touch with your usual contact in the Land and Rural Business team.