McMaster & Others v Scottish Ministers: initial thoughts

Over the past couple of days, I’ve been trying to get my head around the decision in McMaster v Scottish Ministers – the “son of Salvesen”, as Dan Carr described it to me yesterday – in which the rights of the petitioning tenant farmers under Article 1 of the First Protocol to the ECHR (the property right) were held to have been violated. Without rehearsing the decision in Salvesen v Riddell itself, and ignoring the various petitioners (family members, limited partners) whose claims were dismissed, here’s a rough outline of the facts. A note – if you have no familiarity with Salvesen, or the tenancies-held-by-limited-partners wheeze that the market had devised to get round the security of agricultural tenancies conferred by the Agricultural Holdings (Scotland) Act 1991, this will be hard to follow.

The facts

On the basis of provisions in the Agricultural Holdings (Scotland) Act 2003, the McMaster family and others (the petitioning farmers) believed they could acquire secure tenancies in respect of their farms. The 2003 Act required them to take certain actions to acquire these tenancies, which they did. The tenancies were duly acquired. However, because certain of the Act’s provisions turned out to be “not law” per the Supreme Court decision in Salvesen, the tenancies were not as secure as the farmers had believed they would be. Moreover, the actions taken by the farmers on the basis that they would receive this security had soured the relationship between them and their landlords. The outcome was that the farmers had already or would soon lose the tenancies entirely. Scottish Ministers had not provided any compensation to the farmers in relation to this sequence of events, neither in the 2014 Remedial Order which confirmed the law post-Salvesen, nor in response to subsequent applications by the farmers. It was contended that this amounted to a violation of A1P1, the right to peaceful enjoyment of possessions.

A successful claim under A1P1 requires the claimant to have “a possession”, and for state action to have unjustifiably interfered with the peaceful enjoyment of that possession. The interference will be justified only if it is lawful, pursues a legitimate aim in the public interest and is proportionate. Lord Clarke considered each of these issues in turn, along with a couple of others (chiefly the victim status of the various categories of petitioner) which I will not consider here.

Possession

First, did the farmers have a possession? The court held that they did: the tenancy acquired following their performance of the required actions under the 2003 Act.

In making their case, the farmers had also claimed to have another possession, namely their legitimate expectation of acquiring a secure tenancy provided they took the action required by the 2003 Act. This was held not to be a possession, since their legitimate expectation could not be tied to an existing property right, as the Strasbourg jurisprudence requires.

This conclusion sits a bit uneasily with me. I think there is a case to be made here that the existing property right on which their legitimate expectation was founded was the lease in place between the landlord and the limited partnership prior to the farmers taking the action required under the 2003 Act to acquire their own tenancy.

Making this case requires me to do some violence to the law that I would normally rather avoid. In private law terms, the first lease is a completely separate possession from the second. The parties to the first lease (the landlord and the limited partnership) are different from the parties to the second (the landlord and the farmers). The McMaster petitioners did not “own” the first lease – those property rights were held by an entirely different legal person. Therefore the first lease was a not a possession of theirs on which the legitimate expectation of acquiring a secure lease could be founded.

The impetus for the 2003 Act, though, was the Government’s belief that the farmers, though not a party to the first lease, were nevertheless the “true” tenants under the first lease. They were the de facto tenants, let us say, though not the de jure tenants. The relevant 2003 Act provisions were essentially designed to force the legal relationships in this respect to match up with the lived relationships. Although domestic private law is clear that the rights arising under the first lease were not held by the farmers, I do wonder whether their position as de facto tenants under the first lease should be enough to render it a possession of theirs nevertheless in the context of the ECHR’s notorious “real and effective protection”. The Government’s own conduct prior to drafting the Remedial Order seems to chime with this argument, which might be said to strengthen the case.

Interference

Second, did state action interfere with the farmers’ peaceful enjoyment of their tenancy? Lord Clarke found the introduction of the Remedial Order, which clarified the rights received by the farmers as a result of taking action under the 2003 Act, to be a control of use of their tenancy. That seems, to me, correct.

(If my legitimate expectation argument above is correct, the Remedial Order would also have the effect of interfering with that legitimate expectation, on which more below.)

Justifying the interference

In terms of justification for the interference, parties agreed that the Remedial Order was lawful and pursued a legitimate aim in the public interest, so the only issue outstanding was proportionality. In short, the petitioners argued that the Ministers’ refusal to provide compensation for the interference left them bearing a burden greater than was justified by the aim of the state action. Lord Clark was satisfied the lack of provision for a compensation scheme in the Order was not in itself a violation, since compensation claims could nevertheless be made by the farmers. The problem was that such claims had been refused.

Should compensation have been given?  Lord Clark was satisfied that, if a loss could be proved, then it should.  He reaches the conclusion that:

“in principle, in circumstances such as the present, the State should compensate individuals for loss directly arising from reasonable reliance upon defective legislation passed by it, which was then remedied by further legislation which interfered with the individual’s rights under A1P1.” (para 190)

He later summarises:

“The principles which ought to have been established are that compensation would be paid in respect of specific losses directly caused to [the farmers] as a consequence of reasonable reliance by them upon having a secure 1991 Act tenancy, and for frustration and inconvenience, subject to the counterbalancing effect of setting off the value of the benefits obtained by [the farmers] arising from the extended period of tenancy which was enjoyed.” (para 195)

So compensation should be paid in respect of losses incurred following reasonable reliance on the original, faulty provisions of the 2003 Act. I am having a hard time making this fit together with the answers given earlier in the case as to the possession we are concerned about. The possession in question is the tenancy acquired by the farmers. The Remedial Order controlled the use of that tenancy by clarifying the terms on which the landlord could end it. That might certainly affect the value of the tenancy. However, that is not the loss for which compensation should be granted. Compensation is due in respect of losses resulting from action taken in reasonable reliance on an earlier state action, namely the passing of the faulty legislation. What the farmers should be compensated for is reasonably expecting, based on the state’s action, that a certain situation would obtain, when in fact it did not. What that looks like to me is a loss resulting from – you guessed it – state interference with the farmers’ legitimate expectation of acquiring a secure tenancy. The wheels are off the bus.

I can see why accepting the existence of a legitimate expectation as a possession might be worrying to the court in this case – if you legitimately expect to acquire a secure tenancy, and then you don’t acquire a secure tenancy, should a massive claim for deprivation of a very valuable secure-tenancy-shaped asset not result? But I’m not sure that follows. The farmers received tenancies. They were less secure than anticipated, but they still existed. The legitimate expectations were not fully realised, but partial disappointment seems, if anything, a general interference with the peaceful enjoyment of possessions rather than a deprivation OR a control. Compensation is not a requirement of proportionality for general interferences. In the circumstances, the court might still consider compensation to be necessary to balance out the interference, but the extent of that compensation could be determined with reference to factors like the benefit to farmers of having what appeared to be a secure tenancy for years, and the fact that what the farmers legitimately expected to receive was a windfall benefit in the first place. It does not seem obvious to me that compensation equivalent to full market value of a secure agricultural tenancy would be the necessary result of a finding that legitimate expectations had been disappointed in this context. It might even be the case that a nominal sum, or simply a finding by the court that the state was in the wrong, would be sufficient compensation to render the interference proportionate.

Anyway. I’ve been dipping in and out of the case and this blog post between other commitments since yesterday lunchtime, and had better turn my attention back to the things I am actually supposed to be doing this week. I will post this now, though my thoughts feel unfinished. Discussion would be welcome.

Advertisements

Disinheriting your children: Ilott v Mitson, succession policy and Scottish law reform

I thought I might take advantage of the surprising (to me anyway) media interest in the English Court of Appeal decision in Ilott v Mitson to raise a couple of questions about the current Scottish succession consultation. The key question here is: should parents be able to disinherit their children? Your answer could be: (a) Always; (b) Never; or (c) the very lawyerish In Certain Circumstances.

England plumps for option (c). The default position is that a parent can disinherit their child if they so wish. However, the Inheritance (Provision for Family and Dependants) Act 1975, ss1-2 allows a child to ask the court for money from her parent’s estate where “reasonable financial provision” has not been made for her. The Act lists various factors the court should take into account in determining whether “reasonable financial provision” has been made, and if not, how much money the child should receive to make up for it. That list includes the child’s current and future financial needs and resources, and the needs and resources of any competing beneficiary.

In Ilott, the appellant was the adult child of the deceased Mrs Jackson. Mother and daughter had been estranged for 26 years prior to the death, three attempts at reconciliation proving unsuccessful. Mrs Jackson had left her £486, 000 estate almost entirely to three charities with which she had no particular connection in life – the Blue Cross Animal Welfare Charity, the RSPB and the RSPCA. Her daughter, who by this point had raised five children, lived with her husband in a council house, dependent on benefits.

Awards under the 1975 Act tend to be made to a disinherited child where: (i) the child is under the age of majority on her parent’s death; (b) an adult child has remained dependent on her parent as a result of disability, or; (c) a particular moral obligation is deemed to have arisen, for example, where an adult child has taken care of her parent in old age. The fact that none of these circumstances arose in the Ilott case seems to be the source of the consternation about the decision in the media reports, but the legislation does not restrict awards to these circumstances. The court found an award to Mrs Ilott “reasonable” because of her straitened financial situation, which seemed likely only to deteriorate as she grew older, in combination with the fact the competing beneficiaries – the charities – had no needs and resources to be taken into account. The court did not consider it relevant that part of Mrs Jackson’s estate was made up of money inherited from the appellant’s father on his death, and gave little weight to the fact that Mrs Jackson had been (in the finding of the judge at first instance) “unreasonable, capricious and harsh”. According to Arden LJ, the wishes of the deceased, although obviously relevant, are limited by the discretion Parliament chose to give to the court when introducing the 1975 Act.

The interest of all this for Scotland is that the Government is currently consulting on whether to remove the protection from disinheritance that children in Scotland have enjoyed since the 1300s. As I explained in more detail in another post, children’s current non-discretionary entitlement to one third of their deceased parent’s moveable estate could be replaced, either by a non-discretionary “legal share” of 25% of what they would have received on intestacy, or by an entirely discretionary award available only to dependent children under 18 (or under 25 in full-time education or training.)

I recently had a discussion with my Glasgow colleagues @dotreid, @culbokster, @jilljrobbie and @stephen_bogle about responses to the consultation paper. We asked a lot of the same questions that the media have been asking in relation to the Ilott decision. When should children be protected (or not)? Why? What about the wishes of the deceased? What does this mean for our understanding of “family”? What about intergenerational social justice? (I haven’t seen the media ask that last question yet, to be fair.)

The consensus in our discussion was that there are substantial policy issues surrounding reform of the law of succession that have not been addressed or even acknowledged in the consultation paper. Family law policy in Scotland and the UK recently tends towards the idea that law should facilitate the choice to enter or leave intimate adult relationships, but the parent/child bond is for life. Current low wages and high housing costs mean even fully employed adult children will struggle to save the deposit required to buy a house – does intergenerational fairness require that parents who have benefitted share the wealth of the house price bubble? If adult children can always inherit, should they also take responsibility for the care of elderly parents, perhaps relieving some of the financial burden on the state? Should our succession reforms aim towards social justice more broadly in the same way as our land reform policy arguably does, making it more difficult for wealth to be concentrated in the hands of a small number of families? Should our succession policy be more actively pro-business, taking care to ensure that, whatever the rules, family businesses should not have to be dismembered to ensure satisfaction of inheritance claims?

Whatever view you take on questions like these, it’s hard to avoid the fact that succession policy is an acutely political issue. And yet, avoid it the consultation paper does. The reforms are cast as essentially technical, aiming to simplify the law and make it “fair”, that most nebulous of concepts. It seems unlikely that Mrs Jackson would find the Court of Appeal’s decision fair, but in Scotland, Mrs Ilott’s entitlement would have been automatic.

I think my response to the consultation paper is likely to include a preamble raising this broader policy point: what are we even trying to do here? An answer to that question might help us decide whether Mrs Ilott was deserving, or Mrs Jackson (and the RSPB etc) disrespected.