Supreme Court find A1P1 breach in retrospective legislation

24 April 2013 by

19053359-2Salvesen v. Riddell [2013] UKSC 22, 24 April 2013, read judgment 

When can an agricultural landlord turf out his tenant farmer? The answer to this question has ebbed and flowed since the Second World War, but one element of the latest attempt by the Scottish Parliament to redress the balance in favour of tenants has just been declared incompatible with Article 1 of the 1st Protocol (A1P1) as offending landlords’ rights to property. The Supreme Court has so ruled, upholding the Second Division of the Court of Session’s ruling in March 2012

The reasoning is not just of interest to agricultural lawyers either side of the border. But a brief  summary of the laws is necessary in order to identify the invidiousness of the new law as identified by the Court – and hence its applicability to other circumstances.

As will be seen from my postscript, the decision of the court below to the same effect appears to have had tragic consequences.

The statutes

Since 1948, Scottish agricultural tenants enjoyed indefinite security of tenure, subject only to an order being made against the tenant by the Land Court. But landlords evolved a way round this. They would only grant tenancies to limited partnerships, under which the landlord or nominee was the limited partner and the tenants the general partner. Under Scottish law any partner could dissolve the partnership, and hence the tenancy would disappear in a puff of smoke when the nominee served notice. Out went the “real” tenants.

So the Scottish Parliament resolved to do something about this. The general solution was to forbid the creation of new limited partnership tenancies, but balance up the rights and interests of landlords and tenants by setting up a new system of fixed term tenancies with security of tenure during that term.

What then to do about existing limited partnership tenancies, where the landlord could at any time terminate them and would do so if he felt that the law was going to turn against him? The Scottish Parliament decided that there should be retrospective anti-avoidance provisions. Under section 72 Agricultural Holdings (Scotland) Act 2003, notices of dissolution served since 16 September 2002 (the date of introduction of the Bill) were held invalid unless a landlord could show to the Land Court that, in effect, the service of the notice was nothing to do with the then imminent legislation.

The relevant Minister, when proposing this provision in March 2003, noted that a number of landlords had served dissolution notices on partnerships pending the final shape of the legislation. He said that the 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. Such actions were  “immoral.”

The application of A1P1

The question, therefore, was whether this retrospective legislation was in breach of the landlords’ rights to property under A1P1.

All agreed that A1P1 was engaged by this restriction on a landlord’s right to terminate a lease; it was “control over the use of property.” The real question was whether the interference was proportionate, and that could be established if it achieved a fair balance between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights: [34] of the judgment.

The Supreme Court at [35] cited passages from Norwegian and Polish cases from the ECtHR to this effect

 In assessing compliance with article 1 of Protocol No 1, the court must make an overall examination of the various interests in issue, bearing in mind that the Convention is intended to safeguard rights that are ‘practical and effective’. It must look behind appearances and investigate the realities of the situation complained of. In cases concerning the operation of wide-ranging housing legislation, that assessment may involve not only the conditions for reducing the rent received by individual landlords and the extent of the State’s interference with freedom of contract and contractual relations in the lease market but also the existence of procedural and other safeguards ensuring that the operation of the system and its impact on a landlord’s property rights are neither arbitrary nor unforeseeable. Uncertainty – be it legislative, administrative or arising from practices applied by the authorities – is a factor to be taken into account in assessing the State’s conduct. Indeed, where an issue in the general interest is at stake, it is incumbent on the public authorities to act in good time, in an appropriate and consistent manner.

The Court noted the remarks of the relevant Minister which might be read as displaying “a marked bias against landlords”. And,

As a minority group landlords, however unpopular, are as much entitled to the protection of Convention rights as anyone else….In the present context this means that the rights and freedoms that it guarantees are not just for tenants although their interests are important. They are for landlords too.

But as the Court then observed, the case was not about what the Scottish Government said or did, but whether the Scottish Parliament was acting within its legislative competence – it cannot lawfully act incompatibly with the ECHR. But the minister’s speech was important information for identifying the purpose of the legislation: [39].

The Court did not find that retrospective legislation was per se in pursuit of an illegitimate aim:

Legislation which is retroactive is not necessarily incompatible with A1P1: MA v Finland (2003) 37 EHRR CD 210, 217. As the court pointed out in that case, retrospective legislation is not as such prohibited by that provision. The question is whether the retrospective application of section 72 imposed an unreasonable burden on landlords who had served notices before 1 July 2003, and thereby failed to strike a fair balance between their interests on the one hand and preserving the integrity of the legislation on the other.

The Court pointed out that landlords who served notices between 16 September 2002 and 30 June 2003 were in a worse position than those who served notices after the coming into force of the Act on 1 July 2003. It was thus discriminatory, and

It is hard not to see this provision as having been designed to penalise landlords in this group retrospectively.

This difference in treatment has no logical basis, and the Court decided, was unfair and disproportionate.

A claim was brought under Article 14 (discrimination on the grounds of status) but the Court held that this added nothing to the A1P1 breach: [45]

Reading down and remedies

The Court sought to see if the Act could be read compatibly, applying the strong injunction in section 3 HRA requiring that all statutes be read “so far as possible to do so” to be compliant with the HRA. It could not do so: [46]-[49]

Then it said – could you sever the unlawful sub-section from the lawful rest of the Act? Yes, said the Court: [51]. But what then to do? The Court decided that the appropriate course was to suspend the effect of that decision of the Court for 12 months to allow Parliament to cure the defect – it was a matter for it, rather than the Court, to decide how this should be done. But such remedies to be provided for in any amendments should extend to those already prejudiced by the offending sub-section. Legal certainty did not require otherwise:

In Marckx v Belgium (1979) 2 EHRR 330, para 58, the Strasbourg court declared that the principle of legal certainty was necessarily inherent in the law of the Convention as in Community law, and it dispensed the Belgian state from re-opening legal acts or situations that antedated the delivery of its judgment. It followed the same approach in Walden v Liechtenstein (application no 33916/96) (unreported) 16 March 2000. The court said that it had also been accepted that, in view of the principle of legal certainty, a constitutional court may set a time-limit for the legislator to enact new legislation with the effect that an unconstitutional provision remains applicable for a transitional period. As was noted in Cadder v HM Advocate [2010] UKSC 43, 2011 SC (UKSC) 13, para 58, section 102 of the Scotland Act gives effect to that principle. This suggests that closed cases of whatever kind should be allowed to stand. But if the principle were to be applied generally, it would exclude claims by landlords whose position had been prejudiced by the operation of section 72(10)(b). As already mentioned, that would be incompatible with their Convention rights.

Comment

Quite a lot of interesting things in this.

First, what Parliamentary statements can and cannot be used for. Seeking a declaration of incompatibility is not aimed at the Government but at Parliament. It can help as to the proper (or as here improper) purpose lying behind the provision, and hence the validity or otherwise of the reasons being proferred in court on the aim or the proportionality of the measure.

Second, a corrective to any notion that human rights are just about helping tenants, rather than landlords.

Third, flowing from the fact that a Scottish incompatible law was not within the competence of its Parliament, the delicacy with which the Court trod. Yes it said some robust things about the provision, but mending it, and its effects, was for the Scottish Parliament alone.

A human tragedy

The parties in the underlying litigation went to war over Peaston Farm near Ormiston, East Lothian The judgment simply records that the dispute was settled in 2012, and hence neither landlord nor tenant appeared in the Supreme Court. But an internet search reveals that one of the tenants killed himself weeks before he was due to leave the farm – which his family had farmed for 110 years. He had just finished his final harvest on the farm – and his landlord’s farm machinery had just arrived.

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