9th Report, 2014 (Session 4): Agricultural Holdings (Scotland) Act 2003 Remedial Order 2014

SP Paper 462 (Web Only)

DPLR/S4/14/R9

9th Report, 2014 (Session 4)

Agricultural Holdings (Scotland) Act 2003 Remedial Order 2014

Remit and membership

Remit:

1. The remit of the Delegated Powers and Law Reform Committee is to consider and report on—
(a) any—
(i) subordinate legislation laid before the Parliament or requiring the consent of the Parliament under section 9 of the Public Bodies Act 2011;
(ii) [deleted]
(iii) pension or grants motion as described in Rule 8.11A.1; and, in particular, to determine whether the attention of the Parliament should be drawn to any of the matters mentioned in Rule 10.3.1;
(b) proposed powers to make subordinate legislation in particular Bills or other proposed legislation;
(c) general questions relating to powers to make subordinate legislation;
(d) whether any proposed delegated powers in particular Bills or other legislation should be expressed as a power to make subordinate legislation;
(e) any failure to lay an instrument in accordance with section 28(2), 30(2) or 31 of the 2010 Act; and
(f) proposed changes to the procedure to which subordinate legislation laid before the Parliament is subject.
(g) any Scottish Law Commission Bill as defined in Rule 9.17A.1; and
(h) any draft proposal for a Scottish Law Commission Bill as defined in that Rule.

Membership:

Richard Baker
Nigel Don (Convener)
Mike MacKenzie
Margaret McCulloch
Stuart McMillan (Deputy Convener)
John Scott
Stewart Stevenson

Committee Clerking Team: 

Clerk to the Committee
Euan Donald

Assistant Clerk
Elizabeth White

Support Manager
Daren Pratt

Agricultural Holdings (Scotland) Act 2003 Remedial Order 2014

The Committee reports to the Parliament as follows—

INTRODUCTION

1. The Delegated Powers and Law Reform Committee considered the Agricultural Holdings (Scotland) Act 2003 Remedial Order 2014 (SG 2013/261) and its accompanying Statement of Reasons (SG/2013/262) at its meetings of 14, 21 and 28 January 2014. The Committee submits this report to the Rural Affairs, Climate Change and Environment Committee as lead committee for the draft order.

2. The Committee also submits this report to the Scottish Government for the purposes of section 13(3) of the Convention Rights (Compliance) (Scotland) Act 2001 (“the 2001 Act”).

3. At its meeting of 14 January 2014, the Committee took oral evidence on the draft order from Scottish Government Officials. The evidence received helps to inform this report.

BACKGROUND

Remedial Orders under the 2001 Act

4. In the case of Salvesen v Riddell [2013] UKSC 22 the Supreme Court determined that section 72(10) of the Agricultural Holdings (Scotland) Act 2003 (“the 2003 Act”) was incompatible with certain agricultural landlords’ convention rights to peaceful enjoyment of their property. That provision was therefore outwith the legislative competence of the Scottish Parliament and as a result of section 29(1) of the Scotland Act 1998 is not lawful. The Court suspended the effect of its decision until 24 April 2014 to allow time for the Scottish Government and the Scottish Parliament to correct the unlawful provision. This order sets out the correction proposed by the Scottish Government.

5. The 2001 Act gives the Scottish Ministers power to make a remedial order to make such provision as they consider necessary or expedient in consequence of provisions of an Act of the Scottish Parliament being found to be incompatible with any Convention right. Convention rights are defined for this purpose in section 1 of the Human Rights Act 1998. In order to be able to use this power the Ministers must be satisfied that there are compelling reasons for making the order as distinct from taking any other action.

6. Remedial orders are subject to a super-affirmative form of parliamentary procedure. The Scottish Ministers must lay a copy of the proposed draft order, together with a statement of reasons for making it, before the Parliament for a consultative period of at least 60 days, during which time representations on the proposals are invited. Following the close of the consultation period the Scottish Ministers are required by the 2001 Act to have regard to any written observations submitted within the consultation period.

7. Following that consideration the Scottish Ministers may lay a further draft order for approval by the Parliament which follows the affirmative procedure. The draft order must be accompanied by a statement summarising the observations which the Scottish Ministers have received, any changes which they have made to the order, and the reasons for making those changes. The order cannot be made until it is approved by resolution of the Parliament.

8. The proposed draft order was laid before the Parliament on 22 November 2013 and the consultation period ends on 7 February 2014.

The incompatibility which the order corrects

9. The following explanation of the legislative background and summary of the Supreme Court decision is important to set the Committee’s scrutiny of the order in context.

10. The defect stems from section 72 of the 2003 Act which relates to agricultural tenancies under the Agricultural Holdings (Scotland) Act 1991 (“the 1991 Act”) let to limited partnership tenants. In such tenancies a partnership consisting of the landlord as the limited partner and the tenant as the general partner is the tenant rather than the de facto farmer himself or herself in their own right.

11. The practice of letting agricultural land to limited partnerships became widespread to circumvent the security of tenure afforded to tenants under the 1991 Act. Landlords were reluctant to let agricultural land unless there was a means by which they could recover vacant possession of the farm on the expiry of the lease. By entering into a limited partnership tenancy, the landlord as limited partner could force the tenancy to end, as the dissolution of the partnership on the expiry of the lease would mean that there was no tenant in place to continue the lease.

12. The 2003 Act sought to put an end to the circumvention of a 1991 Act tenant’s right to a secure tenancy in this way. Section 70 of the 2003 Act dealt with future tenancies under the 1991 Act entered into after the 2003 Act came into force. It does two things. It gives the general partner the benefit of the pre-emptive right to buy available to individual tenants. In the event of a purported dissolution of the limited partnership it gives the general partner the opportunity to become the tenant in his or her own right with security of tenure. This effectively removed the benefit of the use of limited partnership tenancies.

13. Sections 72 and 73 were added at stages 2 and 3 of the Bill that became the 2003 Act and deal with the 1991 Act limited partnership tenancies already in existence at that time. The decision to deal with existing tenancies arose because it became apparent that a significant number of dissolution notices had been served to avoid the exposure of landlords to the proposed pre-emptive right to buy. While prospective in effect, sections 72 and 73 altered the legal position of the limited partner and general partner where dissolution notices had already been served. It was not possible for the notices to be withdrawn unilaterally.

14. Section 72(6) is the central provision and provides a means whereby the limited partnership’s tenancy may be converted to a tenancy which the general partner farmer holds in his or her own right. The general partner has the option to convert the lease following the service of the dissolution notice by serving a “section 72(6) notice” on the limited partner during the last 28 days of the partnership. If such a notice is served then the lease is not terminated on the dissolution of the partnership but continues and “converts” into a lease between the landlord and the general partner as sole tenant.

15. Section 72(7) to (11) treats the converted lease differently depending upon whether the landlord served the dissolution notice before 1 July 2003 or on or after that date. 1 July 2003 is the day on which section 72 came into force.

16. For limited partners who served a dissolution notice before 1 July 2003 the converted lease is a secure 1991 Act tenancy unless the landlord successfully challenges it in court. Landlords have 28 days from receipt of the 72(6) notice to make an application to the court. In order to be successful they have to demonstrate to the Land Court that the dissolution notice was served for a purpose other than depriving the general partner of their 72(6) tenancy, and that it was reasonable for the Court to strike down the tenancy. If they are unsuccessful on either ground section 72 imposes a secure 1991 Act tenancy; in other words it has the result that the limited partnership agreement was originally intended to avoid.

17. By contrast limited partners who served dissolution notices on or after 1 July 2003 are treated very differently. Section 72(10) provides that the converted tenancy is not a secure tenancy but is subject to the procedure for notice to quit under section 73 of the 2003 Act. Section 73 provides the landlord with a route to recovery of vacant possession of the farm subject to the notice requirements set out in that section. Provided the landlord complies with its terms the Land Court cannot prevent the landlord from recovering vacant possession on expiry of the notice period. The tenant’s section 72(6) tenancy is therefore different in character as it is not “secure”.

18. The Supreme Court found that the route to vacant possession that section 73 provided was “an appropriate counterweight to the benefit that was conferred on the general partner by section 72(6)”. It found that the effect of imposing a secure tenancy on landlords without that counterweight “had no logical justification” and was “unfair and disproportionate” in particular since the legislation was intended to have an effect that was permanent and irrevocable.

19. The purpose of section 72(10) was to provide a “gateway” to this counterweight It was this mechanism which the Supreme Court said struck a proportionate balance between the tenant’s right to continue the tenancy under section 72(6) and the landlord’s right to regain vacant possession of the farm in due course. Without that balance the effect on landlords was unfair and disproportionate and therefore violated the landlords’ rights to peaceful enjoyment of their property under article 1 of the First Protocol to the ECHR.

20. The Supreme Court therefore found access to the necessary counterweight provided by section 72(10) was too narrow. That provision was therefore incompatible when its application would result in landlords being subject to a secure tenancy. The finding of incompatibility was restricted to section 72(10) but the Supreme Court specifically stated that resolution of that incompatibility would require the whole of sections 72 and 73 to be looked at afresh. The Court was also careful not to interfere with accrued rights in its finding of incompatibility.

21. To be affected by the defect, a notice of dissolution of a limited partnership must have been served before 1 July 2003 (referred to in the order as the relevant period). The Committee understands that it is intended that the order is restricted to addressing those cases. The Committee understands that the position of landlords who served a dissolution notice on or after 1 July 2003 and their tenants is not to be affected although the Committee recognises that the order may require to make provision to ensure that this is the case in light of other changes that are necessary.

22. Within the group of leases where dissolution notices were served within the relevant period distinct groups can be identified which are affected differently by the order. This is set out in the policy note accompanying the draft order and illustrated in a flow diagram prepared by the Scottish Government. The flow diagram is reproduced at the Annex to this report.

23. The Scottish Government considers that a legislative solution is only required for Group 1 (those where the leases have not yet been converted by section 72(6)); Group 2 (those where the lease has been converted and a secure 1991 Act tenancy resulted) and Group 3 (ongoing cases where the lease has been converted but a challenge has been raised to the resulting lease which has not yet been finally determined by the courts). The order does not address the position of the parties where the original landlord of the converted secure 1991 Act tenancy has sold out his or her interest (Group 4) or cases where the limited partner and the general partner reached a bilateral agreement between themselves (Group 5).

24. The Committee is concerned solely with the proposed draft order and therefore makes no comment on the remedies available to parties in Group 4 or Group 5. It is also not within the Committee’s remit to consider the merits of the policy to which the order gives effect. The Committee has scrutinised the draft order in the same manner it would any other proposed draft order applying the reporting grounds set out in rule 10.3 of Standing Orders. These include consideration of whether there appears to be a doubt whether it is intra vires, whether it raises a devolution issue, whether the drafting of the order appears to be defective or contains any minor errors and whether the order clearly gives effect to the Government’s stated policy intention.

THE DRAFT ORDER

Explanation for making a remedial order as opposed to other action

25. The Committee asked the Scottish Government officials to explain why it chose to resolve the legal defect identified by the Supreme Court through the remedial order procedure available under section 12 of the 2001 Act. The Committee noted that alternative options were available to the Government through primary legislation whether through ordinary bill procedure or emergency bill procedure. If making such an order the Scottish Ministers are required by section 12 to be “of the opinion that there are compelling reasons for making a remedial order as distinct from taking any other action”.

26. The statement of reasons (SG/2013/262) which was laid together with the draft order referred to the terms of the Supreme Court judgement and the timeframe within which the legislative correction was required. The statement then explained that the remedial order was “the most appropriate mechanism with a reasonable prospect of delivering a solution within the timeframe set by the Supreme Court”.

27. The Committee is aware of the timeframe within which a legislative solution must be delivered. However, the statement did not address the requirements of section 12 but appeared to justify the action proposed by Ministers by reference to the different criterion of what was “appropriate”. The Committee therefore sought a further explanation from the Scottish Government by reference to the correct criteria set out in the 2001 Act.

28. The Committee considers that the requirements set out in section 12 reflect its general interest in whether any proposal to act through delegated powers demonstrates an appropriate balance between the respective roles of Government and the Parliament in any particular case. The Committee considers that its supervisory role in relation to such matters is particularly important in the present circumstances. The Supreme Court was clear that the solution was a matter for the Scottish Parliament. The Court also highlighted the need for consultation with both sides of the agricultural tenancy industry on the proposed solution and the adoption of a process that dealt with both parties “in a fair and constructive manner” and the Committee has borne this in mind.

29. The Scottish Government officials informed the Committee that whilst the Government had considered other means of resolving the defect, such as the use of emergency legislation, the making of a remedial order was considered to be the best solution. There were a number of reasons for this. The order process involves an extensive consultation period that would allow the interests of all parties involved to be fully considered before the Government reached a final view on the appropriate solution. Part of the difficulty the Government faces is in identifying all the different circumstances affected by the legal defect. In recognition of this the Supreme Court had specifically encouraged the Government to work in partnership with stakeholders to ensure that an ECHR compliant resolution was achieved.

30. The Government accepted that the order process did not permit members to table amendments to the proposed legislation. The order process does however require Ministers to take account of all views expressed in the consultation period before presenting the final proposed solution to the Parliament. The Parliament also retains the ability to decline to approve any proposal.

31. The Government considers that the solution will require a sensitive balancing of interests. It also considers that it was important to avoid “the unintended consequences” which could flow from the combination of different amendments. The order process puts one complete proposal to the Parliament for consideration at a time, while allowing the Parliament the opportunity to recommend changes which the Government would be required to consider.

32. The Committee noted that the Supreme Court had indicated that it would permit the Scottish Government to make an application for more time to enact corrective legislation if that was required. The Committee asked the Scottish Government officials whether this had been considered.

33. The Government advised that it was endeavouring to deliver a resolution in the timeframe set by the Supreme Court, an aim which is supported by stakeholders who seek early certainty as to their legal position. Paul Cackette, Deputy Solicitor to the Scottish Government, explained:

“The order is a rebalancing of the rights of both landlord and tenant. It has been subject to a significant amount of discussion… with representative groups. We knew that we had to make a decision shortly before 22 November, which was the date when we laid the order. That was the last date on which we could guarantee under parliamentary procedure that an order, if it was approved, would go through in time.

We certainly gave some thought at that stage as to whether we had the right answer that sufficiently balanced all the interests. We concluded that the order is the right answer to address the issues and that therefore we did not need to apply for an extended period.”1

34. The Government was therefore of the view that there was no sound reason for seeking an extension which could be put to the Court at this stage. Nevertheless, the officials suggested that they would be willing to consider applying for an extension if the Parliament expressed concerns about the solution proposed by the order.

35. The Committee recognises that it is not for it to consider whether it finds the reasons for adopting the remedial order procedure compelling. Rather the Committee has sought a full account of the basis on which the Scottish Ministers consider the reasons for such action compelling. The Committee recognises that the Government is seeking to give effect to the direction given by the Supreme Court regarding stakeholder engagement and consultation. It would appear from the evidence given to the Committee that the Government has taken care to adopt a process which optimises these requirements whilst affording the Parliament the opportunity for detailed scrutiny and supervision of the proposed solution.

36. The Committee notes that consideration of the policy which the proposed draft order gives effect to is being scrutinised by the Rural Affairs, Climate Change and Environment Committee (RACCE) during the 60 day period and that any concerns as regards that policy can be referred to the Government which will require to take them into account. While amendments are in the Government’s hands through the remedial order process, the Parliament is therefore able to influence the Government’s approach at this point and later during the affirmative procedure process.

37. The Committee is content with the supplementary explanation provided by the Government as to why it considered there were compelling reasons to adopt the remedial order procedure in this case. However, the Committee wishes to remind the Government that each instance where it adopts the remedial order process will be looked at on its merits and the reasons provided evaluated in the context of its particular circumstances.

38. The Committee recognises that the 2001 Act requires that it is the Scottish Ministers and not the Committee that are to be of the view that there are compelling reasons for adopting the remedial order process. But the Committee has a supervisory role to scrutinise why that view was taken and it will exercise that role robustly in every case. The Committee would have found it helpful if the accompanying statement had specifically addressed the question of compelling reasons more fully.

Operation of the order

General approach

39. In evidence the Committee sought a general explanation from Government officials as to why they had selected the approach taken in the order as the appropriate means of resolving the incompatibility identified by the Supreme Court. The Committee observed that the solution favoured by the Government was to provide a means by which parties in groups 1, 2 and 3 were afforded access to section 73 and hence the necessary counterbalance it provides to the effect on landlords of the conversion of the tenancy by section 72(6). Paul Cackette explained:

“The answer to why section 73 was chosen ties in with why section 73 exists in the first place. There was a recognition that, …..tenants would find themselves removed on no notice because of the collapse of the partnership. Section 73 was in effect the same as a 1991 Act tenancy, but it did not have the succession provisions or the inability to bring it to an end, which were the difficulties that the court criticised in section 72 giving a full 1991 act tenancy. In effect, section 73 was a halfway house that provided extra protection….

…What the Court implied – and it was not directly addressed in section 73, so you cannot rely too much on this – was that a section 73 outcome would have been okay in the current circumstances….

…given that the Supreme Court criticised the inconsistency of outcomes, we reached the view that the best way to resolve the issue was to try to ensure that everybody directly affected by the operation of law – the operation of section 72 – would be put in the position of being in the same section 73 scenario. ”2

40. The Committee noted that section 73 may have been considered an appropriate solution in 2003 but queried whether it was presently working well in practice for those tenancies to which it applied. The Scottish Government confirmed that there was no evidence to suggest it was not working and that this is the route to a rebalancing of interests which is favoured by stakeholders.

41. The Committee observed that the manner in which access to section 73 was provided differs between the groups. Mindful of the Supreme Court’s criticism of the differential treatment of landlords in the 2003 Act, the Committee asked the Scottish Government for justification of the difference in treatment between the groups which the order makes and whether it was fair and equitable.

42. The Scottish Government officials advised that the different treatment results from their aim of securing a fair balance between the rights of landlords and tenants as appropriate to those different circumstances. The Government has not sought to restore the position to what it was in February 2003 since that did not seem to be fair on tenants in particular. Landlords are being given further additional rights to respect the fact that in some cases their ECHR rights were breached. But what the Government considers is a fair balance will differ according to those circumstances.

43. The Government stressed that the overarching aim was consistent across all the groups and was consistent with the treatment of landlords who had served dissolution notices after 30 June 2003. All would have access to the counterbalance of section 73 but the manner in which that access was provided would be different in each group.

44. One option which the Government had considered was to provide that the Land Court would resolve the respective position of all landlords and tenants in groups 1, 2 and 3. That was rejected since it would not keep delay to a minimum or deliver certainty to the parties. The Government also did not consider it sensible to require parties to go to court for a resolution. However, ongoing cases in group 3 would already be in the middle of a court dispute. For those cases already in court it was considered that these cases would best be addressed by the Land Court. Article 3 of the order makes specific provision for these cases to reflect this.

45. The Government explained the particular circumstances to which it had regard in proposing a solution for group 2 as follows:

“…those in group 2, in which tenants in good faith may have thought that they had a full 1991 act tenancy for a number of years are in a different factual position from tenants in group 1, who knew that there was a possibility that they may end up with security, although that could not be guaranteed…..

…we have also sought through various mechanisms, including… the cooling-off period, to try to ensure that in giving the landlords additional rights the effect on tenants is minimised as far as it possibly can be.”3

46. The Committee noted that leases in group 2 were not directly “converted” from secure tenancies to section 73 tenancies by the order. Instead landlords of such leases are given the right to convert the lease by “opting-in” to section 73. If they wish to do so then they must serve notice to that effect on the tenant within the period of one year beginning on 28 November 2014. Depending on the facts this could result in landlords having to wait longer before acquiring the ability to bring the lease to an end. It would also result in a continued period of uncertainty for tenants balanced against the possibility that, if the landlord does not convert the lease within that period, those tenants would retain a secure 1991 Act tenancy.

47. The Committee asked the Scottish Government to explain why they had adopted this approach to landlords and tenants in group 2. The Scottish Government explained that in some cases a delay in landlords obtaining vacant possession may be necessary in order to properly respect tenants’ rights under article 8 of the ECHR (right to respect for their home). The precise circumstances of affected parties are not known but there could be cases where it would be possible for the landlord to claim immediate vacant possession through a strict application of section 73. The opportunity for a balance between landlords and tenants is required. The cooling-off period offers this to those in group 2.

48. The Government also explained that a possible scenario has been identified in which the Government considers that the opt-in is necessary to ensure an ECHR compliant outcome. Paul Cackette explained:

“It is possible to envisage circumstances in which a landlord might get a windfall from being in group 2. For example, a tenant and a landlord might have reached an agreement way back in 2003 and the reason why the full 1991 Act tenancy exists is that the tenant paid the landlord a sum of money not to go to the Scottish Land Court. The potential risk in allowing conversion is that a landlord might gain a windfall, having received money for not going to court in the first place. The order has the potential to put the landlord in a position of being able to renege on the previous deal and convert the lease to a section 73 lease, but the reason why we are making the landlord make that particular choice is that, if he were to do so – and, in our view, he would have to think very carefully before doing so – he might leave himself open to a claim by a tenant of unjust enrichment from having gone back on the deal…

…The order is ECHR compliant as it stands because it requires the landlord at their own hand to serve a notice…

..That is an example of a situation where the order is designed to be ECHR compliant. It all comes down to the way in which a landlord operates it. If they take the positive step of converting the lease, they could leave themselves vulnerable to a claim.”4

49. In light of this explanation, the Committee explored with the Government whether a new arrangement for a 1991 Act tenancy negotiated between a landlord and tenant in good faith following service of a section 72(6) notice would be allowed to stand by the order. It was recognised that whether such an arrangement was a separate “bilateral agreement” created by the parties themselves as opposed to a “tenancy resulting from the operation of section 72(6)” - and therefore directly affected by the defect - would be a matter of proof in an individual case. But the Committee questioned how this would be treated by the order. The Scottish Government agreed to reflect on this.

50. The Committee notes that consistency of treatment where possible is one of the principles the Government has applied to ensure ECHR compliance. Any difference in treatment must be justified in light of the overarching aim of the order and must be proportionate. The Committee asks the Scottish Government to consider whether the Scottish Government’s policy concerning respect for bilateral agreements agreed directly between the parties (and hence their exclusion from the scope of the order) is consistent if agreements negotiated in good faith between a landlord and tenant for a new 1991 Act tenancy could remain in group 2.

51. The Committee observes that in terms of the order the test of whether an agreement of this kind falls within group 2 or not is likely to be whether the tenancy can be treated as “continuing to have effect by virtue of section 72(6)” (see the definition of “relevant tenancy” in section 72A(4)). The Committee asks the Government to consider whether it is clear how this test would apply in the context of such a bilateral arrangement previously reached in good faith and whether this delivers a consistent outcome.

Ongoing cases

52. The Committee noted that leases which are ongoing cases in group 3 would be converted from secure to section 73 leases by section 72A(1). However article 3 gives the parties the opportunity to have the effect of that conversion in their particular case determined by the Land Court. The order provides that the original remedy sought by the landlord (an order under section 72(8)) will no longer be available because that provision’s repeal will affect the ongoing cases (article 3(1) of the order). In light of that the Land Court is required to “make an order disposing of the application in such manner as it considers reasonable” (article 3(2)). The Land Court is then given very broad powers in relation to that disposal by article 3(3). The Committee is aware that there has been speculation amongst stakeholders as to what this provision might allow the Land Court to do and what it might not.

53. The Committee asked the Scottish Government to explain how the Scottish Government intended article 3 to work in practice. Paul Cackette said:

“For sisted cases – certainly for the vast majority – the termination date will be in the past, because the cases have been sisted for some time. I think that they are almost certainly proceeding by tacit relocation. To give the court the ability to decide what the appropriate termination date will be once the case proceeds seems to us to be a sensible way forward. The court will then be able to balance the different rights, and if the landlord is entitled to repossession they will get it at a date that reflects and allows the court to take into account what the tenant has said about when the date should be…5

54. The Scottish Government also explained that the powers conferred in article 3(3) were considered appropriate to enable the court to terminate the lease and to ensure that the parties do not need to raise a further court action in relation to shortening of the notice period or other matters relating to the termination of the tenancy such as compensation for improvements.

55. In light of this explanation the Committee sought assurance that the broad direction to the Land Court in article 3(2) to “make an order disposing of the application in such manner as it considers reasonable” was consistent with the Supreme Court judgement. The Scottish Government confirmed that in theory the order would allow the court to fix a termination date which conferred a long period of occupation on the tenant but that under the broader legal framework, including the Human Rights Act 1998, the Land Court would require to take into account the Supreme Court’s decision. A decision of the Land Court could be appealed to the Court of Session if parties felt that the particular decision of the court contravened their ECHR rights.

56. The Committee asks the Government to reflect on whether the direction to the court in article 3(2) of the order as regards disposals of the ongoing applications “in such manner as is reasonable” is sufficiently clear and unambiguous in its objective or effect. The Committee is not convinced that there is sufficient clarity as to what extent the court is (or is not) to have regard to the application of section 73 of the 2003 Act; that the original dispute concerned whether an order under section 72(8) should be granted; or any other matters.

57. The Committee takes comfort from the assurance that the ECHR compliance of any decision of the Land Court could be challenged on appeal to the Court of Session. Nevertheless the Committee would not wish any ambiguity or unnecessary latitude in the specification of the task conferred on the Land Court to be a potential source of further dispute and litigation.

Transitional cases

58. The Scottish Government explained that article 4 of the order deals with the particular circumstances in which a section 72(6) notice is served on a landlord within 28 days of the coming into force of the order. The Government intends that landlords who receive a section 72(6) notice before the order comes into force will have the opportunity to decide whether to challenge the conversion of the tenancy or not. If they do then they will be treated as an ongoing case for the purposes of article 3. If they do not then they will be treated as being in group 2. The purpose of article 4 is to deal with landlords who are put in the position of requiring to make this choice in the transitional period around when the order comes into force. Article 4 gives a landlord a full 28 days to make that decision regardless of when a section 72(6) notice is served.

59. The Committee has referred to its concern that the remedies available to the Land Court under article 3 may not be sufficiently clear. The Committee considers that the position of a landlord who applies to the Court under article 4 may be less clear. The sisted cases to which article 3 applies are already in court having applied for the original remedy available under section 72(8) but which remedy is no longer to be available. It is in the context of a change of remedy “midstream” that the Land Court is to dispose of that original application as it considers reasonable.

60. However applicants from article 4 are likely to be aware that a remedy under section 72(8) is not going to be an available option as it is known that on the order coming into force it will be repealed. That repeal may have occurred by the time an application is made. They are able to apply to the court “for an order under article 3” which is for “a reasonable disposal”. The Committee is not convinced that it is sufficiently clear what an application for a “reasonable disposal” means in such cases.

61. The Committee understands that the purpose of article 4(3) is to treat these applications as if they were an ongoing application for an order under section 72(8) to provide parity with ongoing cases. But the Committee is unclear what specific remedy the application will require to be seeking since it can no longer seek that the 72(6) tenancy be struck down.

62. The Committee asks the Government to reconsider whether the order makes clear the objective of an application under article 4(2) for “an order under article 3” of the order. Such cases are different to other cases to which article 3(2) applies since it will be clear from the outset that applications under article 4(2) cannot be given a remedy under section 72(8) whereas those to which article 3(2) applies were entitled to seek that remedy but they are no longer able to be granted it.

63. The Committee understands that the Government’s policy is that the order should only alter the position of leases where the landlords served a dissolution notice before 1 July 2003. The Committee questions whether the drafting of article 4 properly reflects that intention since section 72 can affect landlords who served a dissolution notice at any time.

64. The Committee asks the Government to review the drafting of article 4(1) of the order. If article 4 is not intended to apply to landlords who served a dissolution notice on or after 1 July 2003 the Committee considers that the present drafting of the order is defective. Such landlords would satisfy the two criteria for entitlement to make an application set out in article 4(1). Article 4(1)(a) is satisfied by any landlord who receives a section 72(6) notice within the period specified regardless of when they served the dissolution notice. Landlords who served a dissolution notice on or after 1 July 2003 would always satisfy the requirement in article 4(1)(b) that they have not made an application under section 72(7). That is not because they have chosen not to make an application but because it would not be competent for them to do so.

Guidance

65. The Committee considers that it is very important that all those affected by the Supreme Court judgement clearly understand the effect of the order and how the provisions contained within it operate. In evidence the Committee sought an explanation from the Scottish Government as to how it would ensure that the order is properly understood by those it affects. In particular the Committee queried whether any guidance on the operation of the order would be provided.

66. The Scottish Government informed the Committee of the various steps it was taking to ensure that stakeholders were provided with information about the order. Attempts have been made to contact those who fall into groups 1 to 3. For example, a mailing list which provides regular updates has been set up as have helplines and a website. A policy note will be provided when the draft order is laid before the Parliament for approval. The intention is that this note will set out the options available to individuals as clearly as possible.

67. The cooling-off period provided for in group 2 is also intended to allow for a period of time in which landlords can take advice on the options which are available. The officials confirmed that the Scottish Government would be willing to participate in any mediation between the parties if that is what they both wish.

68. The Committee considers that it is clear from the evidence provided to RACCE that there is considerable confusion and uncertainty as to how the order is intended to operate in practice. In particular there seems to be a lack of clarity surrounding the effect and purpose of the cooling-off period available to group 2 and the remit and powers of the Land Court in disposing of ongoing cases.

69. The Committee notes that the legal situation remains fluid until the order comes into force. It is clear to affected parties that the law will change but not yet clear in what respect. The Government does not know whether any dissolution notices will engage the defect in section 72(10) in the period between now and the order coming into force. Clearly, however, there is the potential for that to occur. In any such case landlords and tenants will need to decide how to act based on the current defective position and in light of the likely solution although that is not yet in place.

70. The Committee considers that such parties are placed in an unsatisfactory position although it recognises that it is difficult for the Government to resolve. The Committee encourages the Government to take all possible steps to mitigate this uncertainty for any parties in this position.

71. The Committee accepts that the Scottish Government cannot give advice or guidance to individuals as to the best course of action for them. However, the Committee asks the Scottish Government to issue general guidance which clearly sets out the effect of the order. In particular the Committee considers that clear guidance should be provided on:

(a) any options which the order provides for parties who may be moving from one of the groups identified by the Scottish Government to another; and

(b) the relationship between the provisions in articles 3 to 5 of the order and the 2003 Act as it is to be amended; since (for example) it is not apparent from reading section 72A of the 2003 Act in isolation that applications under articles 3(4) and 4(2) of the order are ongoing applications for the purpose of that section.

Clarity of drafting

72. The Committee makes the following general observations in the interests of clarity of drafting.

73. The Committee encourages the Government to make the instrument as clear, consistent and straightforward for lay persons to read and understand as possible without detracting from necessary legal accuracy.

74. The Committee observes that all references within the order to numbered section in the Agricultural Holdings (Scotland) Act 2003 are followed by the words “of the 2003 Act” except for the reference to section 72(8) in article 4(3). (The Committee recognises that it is not necessary to do so within the text of section 72A which is to be inserted into the 2003 Act by article 2(3) of the order.) The Committee suggests that the Government may wish to add “of the 2003 Act” after the reference to section 72(8) in article 4(3) of the order for consistency.

75. The Committee observes that a standard interpretation provision for the 2003 Act in article 1 would be clearer to readers of the instrument and easier to find than the parenthetical abbreviation in article 2(1).

76. The Committee asks the Scottish Government to consider whether it is helpful to the reader to provide a specific definition of “ongoing application” for the purposes of article 3 only to extend the scope of that definition by article 4(3).


ANNEX


Footnotes:

1 Scottish Parliament Delegated Powers and Law Reform Committee Official Report, 14 January 2014, Column 1215

2 Scottish Parliament Delegated Powers and Law Reform Committee Official Report, 14 January 2014, Column 1219

3 Scottish Parliament Delegated Powers and Law Reform Committee Official Report, 14 January 2014, Column 1221.

4 Scottish Parliament Delegated Powers and Law Reform Committee Official Report, 14 January 2014, Column 1230

5 Scottish Parliament Delegated Powers and Law Reform Committee Official Report, 14 January 2014, Column 1224

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