Thank you very much, convener.
I want to make a short opening statement to set out the Scottish Government’s position in a number of areas that relate to mediation and compensation. Those areas have been covered in more detail in correspondence with the committee so far, most recently in my letter to the committee of 17 September.
The issue that we are discussing is, of course, of importance to many tenant farmers in Scotland and, indeed, to landlords. It relates to changes to one category of tenancy agreements between landlords and tenants. Prior to 2003, limited liability partnerships could be dissolved with minimal notice, which potentially exposed tenants to the risk of their tenancy agreements being revoked at very short notice. The Agricultural Holdings (Scotland) Act 2003 sought to protect the position of those tenants and transferred their tenancies into Agricultural Holdings (Scotland) Act 1991 tenancies—long-term heritable tenancies with security of tenure and succession rights.
Ten years later—on 24 April 2013—the Supreme Court issued its judgment in the case of Salvesen v Riddell, which involved a dispute between a landowner and a tenant over the dissolution of a limited partnership. In its judgment, the court held that section 72(10) of the 2003 act was outside legislative competence, as its effect breached landlords’ European convention on human rights property rights. The court provided the Scottish Government with 12 months to put right the defect. The Agricultural Holdings (Scotland) Act 2003 Remedial Order 2014 is the legal remedy that was put in place to address the defect. The order came into force on 3 April 2014.
The remedial order sought to balance the respective ECHR rights of landlords and tenants and allows landlords a means of recovering vacant possession through section 73 of the 2003 act. To bring tenancies to an end, landlords must serve conversion notices. The remedial order contained a cooling-off period in which those notices can be served. That period ends in a few weeks’ time, on 28 November 2015. The cooling-off period and notice provisions in section 73 of the 2003 act ensure that tenants who are served with dissolution notices are afforded four and a half years of extra tenure under the remedial order. That means that that runs until 28 November 2018.
The remedial order places such tenants in a better position than they would have been had the 2003 act’s provisions not violated the rights of the landlords. In that event, the tenancies would have ended with the dissolution of the limited partnership or shortly thereafter through the operation of section 73. Under the remedial order, the tenant has three further years of tenancies under sections 72A and 73, as I have said.
Landlords and tenants have been and are free to agree private arrangements. If landlords take no action by 28 November this year, the tenancies that are converted under the 2003 act will remain as 1991 act tenancies.
We understand that around 350 notices were served on the night of 3 February 2003. However, only seven cases now remain unresolved to our knowledge. For those remaining seven cases, we have proposed and do propose mediation to encourage and secure positive working relationships between affected landlords and tenants and to find appropriate solutions to support the on-going viability of the affected holdings. The Government initially proposed a two-stage mediation process, with stage 1 focusing on sharing information and clarifying facts and stage 2 offering the possibility of a negotiated solution if appropriate, in the light of the particular circumstances of each case.
In practice, it is fair to say—and I think that the committee accepts—that the Government’s proposed procedure has not materialised in the way we had envisaged. We asked any party that wished to engage in mediation to clarify whether they wished to claim against the Scottish Government and the legal basis of such a claim before entering into mediation. That was so that we could assess the matter and confirm our position, in order that any participation in mediation by the Scottish Government would be on an open and understood basis about liability.
The offer of mediation was taken up by the tenant and landlord associated with just one farm. That tenant was one of seven who took their claims to court against the Government, however, by raising a petition in the Court of Session in March 2015. The landlord in the case intimated a claim only on 17 August 2015.
The Scottish Government’s position on compensation has always been that we could not comment on or commit to the payment of compensation in individual cases until the basis of such claims had been made known to us. That was the position during the passage of the remedial order, and was reiterated when I wrote to the committee on 5 December 2014.
The current position is that seven tenants have raised a multimillion pound court action against the Government, seeking compensation. The action has been sisted until 19 October and liability has been repudiated. The Scottish Government’s position on liability has been consistent from the start: we cannot pay compensation in settlement of a claim that has no legal or factual basis. We have acknowledged that the remedial order may be only part of the solution and have said that the Scottish Government is, and always has been, open to considering all claims presented to us.
At the time of the committee’s consideration of the order in 2014, we did not know the basis of any claim that might be brought against the Government in the future. In evidence to the committee, we confirmed that any future case would be considered on its merits, in the light of the particular facts and circumstances. There was clearly never intended to be a blank cheque to pay compensation regardless of liability, and nor could there have been.
Our position remains that, should a claim against the Scottish Government be presented and we take the view that legal liability will arise, we will of course consider the claim in that context. However, in the light of the committee’s concerns and those of the tenant farmers, and no doubt of the landlords and their agents, I give the commitment to the committee that I am determined to resolve this quickly if at all possible, provided that we can persuade the landlords and tenants to come into the mediation process.
Given that the next few weeks will be crucial in doing that, we will redouble our efforts to try to make that happen.