Justice and Home Affairs Committee, 04 Oct 2000

Meeting date: Wednesday, October 4, 2000

Official Report 230KB pdf

---

Leasehold Casualties (Scotland) Bill: Stage 1

We now resume our stage 1 consultation on the Leasehold Casualties (Scotland) Bill. I welcome Adam Ingram MSP—the bill's sponsor—to the committee. There will be a short hiatus while the first witness is brought up from the nether regions of the building.

I would like to put Kate MacLean's apologies on the record. She has not simply not turned up—she intimated to me that would not be able to attend.

Michael Matheson is not here because he is attending a funeral.

Is he in the same place as Phil Gallie?

He is not at the Conservative party conference.

I welcome Alistair Rennie, who is Deputy Keeper of the Registers of Scotland, and Ian Davis, who is that agency's head of legal services. Do you wish to say a few words by way of introduction, Mr Rennie?

On behalf of the Keeper of the Registers of Scotland and the agency, we would like to intimate our support for the bill, which would remove confusion that has existed in the law for nearly 100 years. It is crucial that that is sorted out as soon as possible.

I dare say that you are aware of some of the correspondence from Mr Hamilton to the Law Commission. He contends:

"The Keeper has a financial interest in the outcome of these deliberations. My company, and the Keeper is on his warning, is taking action to recover a sum in excess of £200,000."

I appreciate that the letter was written some time ago, but the implication is that Registers of Scotland is interested in the bill being passed simply to get itself off the hook—a hook that it has got itself on to.

Section 8 of the draft bill totally undermines that argument. The rights that Mr Hamilton had against the keeper before the draft bill was published have been preserved.

I thought that you would say that.

I read with interest the correspondence from Mr Hamilton, in which he made the same point as the convener. He was actually making the slightly wider point that not only the keeper, but the legal profession, wanted to be let off the hook. To put it mildly, I can understand why.

Although I do not oppose the bill, I have some sympathy for Mr Hamilton's point that, by and large, individuals have never had to pay out because of the confusion that Alistair Rennie mentions. People have entered into voluntary purchases, leases or whatever, but their legal advisers have not picked up that problem. Had it been picked up, landlords' ability to make casualty charges would have been reflected in the price that people paid. People have ended up paying full value, without that consideration being taken into account, because lawyers and keepers have missed it. However, the oversight has been spotted later.

The fault lies with legal advisers who have, Mr Hamilton tells us, picked up the tab, by and large. The proposals would let them and their insurers off the hook. That is an interesting argument, which I had not thought of.

I can understand the argument from Mr Hamilton's or any other landlord's point of view, but the fact remains that, for about 90 years, landlords have not enforced such casualties. The original case that brought the issue to light in the 1990s involved a company called Monocastle, which owned the Wishaw and Coltness estate. Monocastle did not realise that it had a right to casualties and was not enforcing them. The majority of the legal profession thought that leasehold casualties had been abolished in 1914 or had fallen into desuetude because nobody was claiming them.

That makes Mr Hamilton's point. The legal advisers did not know what the law was.

I do not think that Mr Rennie is here to answer for the legal profession.

I will begin with some technical questions. Why would casualty clauses be omitted from title sheets under the burdens section of properties in the land register?

The keeper has a duty under section 6 of the Land Registration (Scotland) Act 1979 to include only subsisting burdens in a title sheet. Feudal casualties had been abolished so we had to excise them. Some people got confused between the leasehold casualty and the feudal casualty and excised the leasehold casualty.

Those omissions have proved pretty costly. About £250,000 has had to be paid out in settlement of casualties claims. What steps have you taken to correct the register?

We have taken steps to stop that confusion. The problem is that, once a title sheet has been created, one is supposed to be able to rely on it without looking behind or beyond it for information relating to that title. Therefore, if there is an inaccuracy in the register, the register can be rectified only in very restricted circumstances. If we have omitted the casualties, circumstances would usually forbid the keeper from rectifying the register, so the situation must remain. As a consequence, we have had to pay landlords.

When you said that some people got confused, did you mean that some people in your organisation got confused?

Yes.

In what circumstances is a decision made to rectify an omission from the register?

Section 9 of the Land Registration (Scotland) Act 1979 provides that the keeper can rectify to the prejudice of a proprietor in possession only if one of four circumstances pertains. First, that can be done if the person consents. Secondly, it can be done if a person has, by his own fraud or carelessness, caused the inaccuracy in the register. The other two circumstances are fairly irrelevant to the purposes of this exercise. If one has left the leasehold casualty out of a title sheet, it is obvious that to put it back in would prejudice the proprietor in possession, who would be the tenant. Therefore, under the terms of the statute the keepers cannot rectify most cases.

I presume that there is a general indemnity on registration, not only in relation to casualty clauses.

Yes.

Do you have a contingency fund or budget for settlement of any claims against you?

We settle claims from income.

How much does that cost annually?

It costs about £40,000 per annum.

So the settlement of casualty claims caused a dramatic increase in those figures.

Yes. The increase has been relatively high.

You said that you picked up that error. Is your position that there will be no new errors after a certain date?

Yes. The cases in which we had problems were first registered between 1984 and 1987. When we realised that things were going wrong, we issued fresh staff instructions, to highlight the situation and to try to avoid more confusion.

I will not ask about money—that subject has been covered.

On a technical point, although I am not a conveyancer, I understand that the certificate, once issued, becomes the title. Are you saying that, if compensation has been paid, or if certain people who were enforcing the casualties have been paid off, there is nothing on the title sheet to indicate that that has happened? Can nothing be added to the title sheet to say that the casualty cannot be enforced or that that contractual obligation has been bought off—if that is the right way to describe it?

The casualty will no longer appear on the title sheet, so there is nothing—

There would nothing to eradicate because there would have been nothing there in the first place. That was a stupid question.

Do any of the claims come through the Register of Sasines?

No. The keeper does not guarantee the Register of Sasines.

I know that, but do you get claims about sasines titles?

No. We have had no such claims.

I merely wondered whether wording might be inserted into titles to indicate that the casualty has been terminated.

On that point, would the problem have existed prior to the establishment of the Land Register in 1979?

On the Register of Sasines, the Keeper of the Registers of Scotland does not have to examine burdens in order to see which continue to subsist. People who examine their deeds in the Register of Sasines would examine the original deeds rather than a title sheet.

Would they have seen a casualty on the deeds?

Yes.

I noted your point that a title cannot be rectified even if there is an error in it. Can the title be rectified on the sale of that property?

No. People are entitled to rely on the title sheet.

For all time?

Yes.

The purchaser of a property may have been compensated because he had to pay a casualty to whoever was entitled to receive that money. What happens when that purchaser then sells the property? The casualty will not be on the title deeds, so is the subsequent purchaser also liable to pay the casualty?

No. We would not compensate the purchaser. We would compensate the landlord for his inability to seek the casualty from the purchaser. That subsists for all future purchasers.

Therefore, compensation has been paid to landlords rather than to the people from whom the casualties were due.

That is correct.

I do not understand that. I thought that the keeper's job was to make good the title. Why do you not compensate the person who owns the property?

Because he has not suffered any loss. The tenant—the person who is in possession of a 999-year lease—is under no obligation to pay a casualty when the keeper has left that casualty off the title sheet. Therefore, the landlord has suffered a loss through his inability to enforce the casualty.

Do you have any more liability on future transfers of those 999-year leases?

No. We have bought out the casualties, as it were.

Have you any idea how many more problems with casualties there might be?

To be honest, I cannot express an opinion on that matter. I believe that there are very few that we have been unable to eliminate. For example, when we discovered the casualties in the Wishaw and Coltness estate, we went immediately through every title that we had issued to check its position.

Would it be fair to say that you have made provision in your budget for covering situations in which you might be liable under section 8 of the Leasehold Casualties (Scotland) Bill, if enacted?

That is correct.

Do you have any redress against a solicitor who makes a mistake and sends the deeds to you with the casualty omitted, or whatever the procedure is, or does the blame fall on your shoulders because you do not pick up that error?

We are able to rectify the register when a solicitor has, through carelessness, given us erroneous information. However, that depends on the information that we have sought from the solicitor. If we have not asked the right questions, we cannot blame a solicitor for not giving us an answer that we have not sought.

My question is not meant to be frivolous, but are there other ancient legal obligations in title deeds? Were you prompted to trawl through and check that there was nothing else in those old titles that might cause problems for the keeper?

Off the top of my head, I cannot think of an example of such an obligation.

Do you have an opinion on that?

We thought about other matters that might confuse people and we tightened up our instructions.

As there are no further questions, I thank Mr Rennie and Mr Davis for their attendance. There will be another slight hiatus while we wait for our next witnesses.

Dr Eric Clive and John Dods of the Scottish Law Commission have joined us. Would you like to make a brief statement?

Thank you, convener.

I was the commissioner in charge of the project that led to the Scottish Law Commission's report on leasehold casualties. My colleague, John Dods, was among the legal staff who worked on the project. I am no longer with the Scottish Law Commission, but because the commission's policy has not changed since the report was submitted, the commission asked me to speak today on its behalf.

I congratulate Mr Ingram on the introduction of his bill. The commission is naturally very pleased that its recommendations have been brought so promptly before the Scottish Parliament.

Mr Ingram and Professor Robert Rennie have fully explained the background to the bill, but it might, if you wish convener, be useful for me to say a few brief words about the commission's involvement in leasehold casualties and about how the bill differs from the commission's recommendations.

Briefly.

Thank you.

In 1997, the then Secretary of State for Scotland asked the Scottish Law Commission to consider the law on leasehold casualties and to advise on possible reforms. That request followed press publicity and debates in Parliament about attempts by some landlords to revive and enforce those semi-forgotten rights.

The Scottish Law Commission's method of working is that it conducts its own research, publishes a discussion paper, seeks views on that discussion paper from as many knowledgeable people as possible and prepares and submits a report. In recent years, the commission has found it useful to have an advisory committee or group to assist it with specialist advice on technical problems. Those methods were followed in the case of the work that was done on leasehold casualties.

We distributed the discussion paper to a wide range of people, including landlords and landlords' representatives, such as the Scottish Landowners Federation. The replies that we received from landowners were rather disappointing in number, but we received some helpful comments, including some very helpful comments from Mr Brian Hamilton. In the light of the comments that it received, the commission formulated its recommendations and reported on the matter in 1998.

I mentioned the commission's working methods because a complaint was received from Mr Hamilton to the effect that the deputy keeper and, perhaps, other members of the advisory group were not impartial, as it were, and that they should not have been on the group if Mr Hamilton was not.

I suppose that Mr Hamilton's reasoning was that he had actions pending against the Keeper of the Registers and might have made claims against members of the legal profession. When the Scottish Law Commission embarked on the project, it needed information quickly. It seemed natural that the commission should seek help from the keeper and from Professor Rennie, who works in a leasehold casualties area. There is nothing sinister about the inclusion on the committee of those experts. We did not know at that time that Mr Hamilton was as knowledgeable as he is about leasehold casualties and we had no reason to suppose that he would be willing to share his knowledge with us, so there was nothing sinister about his exclusion.

It is important to stress that the commission's function is not to act as an adjudicative body. We do not exist to adjudicate between individuals; our role is to consider the law and to advise on possible reforms. We are concerned with the general question of reforms for the future. I mention that because I think that that point might be raised.

On compensation levels, there is a big difference between assessing compensation in an individual case and devising a package of compensation that can apply fairly and efficiently across the board as part of a necessary reform. The Scottish Law Commission was concerned only with the second of those objectives—we make that perfectly clear in our report.

There are three respects in which the bill differs from the commission's report. The bill includes compensation for the loss of rental value casualties, based on the ground rent. The commission recommended—for reasons that are set out in its report—that there should be no compensation for such casualties. That refers to the future, of course. I must emphasise that we were not concerned with accrued arrears. The commission mentioned in its report that assessment of compensation on the basis of the ground rent would be a possible solution, if compensation were thought to be appropriate. It is clear that the commission has no objection to the bill in that respect. It is wise and sensible, given the emphasis on human rights, to err on the side of safety.

Another respect in which the bill differs from the commission's report is that it comes into force on the date of introduction and not on the date of royal assent. The commission did not think it necessary to have even that modest element of backdating, but I can understand the concerns that might have led to that.

Finally, the bill differs from the report by the inclusion of section 8, which relates to pending actions based on the Land Registration (Scotland) Act 1979. We did not consider a special provision for such actions, because we assumed that our recommendations would not affect accrued rights, including accrued rights to an indemnity.

Those are the only points that I wanted to make, but Mr Dods and I will be pleased to answer any questions.

Thank you. I will start by making the obvious point—which was made by Mr Hamilton—that the major effect of the bill would be to get solicitors off the hook in future and protect them from the results of their own incompetence.

I do not agree with that. Even if everything was fully known and proper advice was given in every case, somebody who bought a bunch of old titles could, in effect, set himself or herself up as a private tax collector and levy substantial charges on the transfer of leases. The basic system seems to be wrong, oppressive and in need of reform.

Surely the point that is being made is that, if solicitors did their job properly, people who purchased property under such leases would be aware of the burdens that they were letting themselves in for.

They would, and that would remove one of the major complaints about the human effects of the actions that have been taken by landlords. People would not be taken by surprise, but we would still have what is—in the Scottish Law Commission's view—a fundamentally bad system. An archaic set of provisions that imitates feudal provisions has survived, despite the abolition of the feudal equivalents. That system represents a substantial charge on the transfer of property and needs to be abolished.

Oddly enough, as time has gone on, I have found the matter increasingly difficult. The feudal system has been changed, but not enough in this respect. Somebody can buy an estate because—rightly or wrongly—he sees in its title a value that is based not only on ground rent, but on a casualty value that is based on the rental value of the property. An intelligent prospective buyer would buy the title because it had that value. He would then find that people did not want to pay him that value because their lawyers had missed it. That is largely the reason for the problem.

The Deputy Keeper of the Registers of Scotland has told us that even lawyers are confused about the matter. I think that that was a euphemism for, "We got it completely wrong." Why should somebody no longer get what a casualty is worth, simply because those in the legal profession have missed the casualty, despite knowing what the law is on the matter? Why should not they be paid the casualty—which they bought in good faith—by those who got it wrong, such as lawyers, their indemnifiers and the keeper? Are you satisfied that the ECHR is not contravened by saying to the man who has bought such a title in good faith, "We know that you read the title and bought it. That's what it was worth, but we've decided you're not getting that, because we don't think the law should be as it is"?

That argument was put forcefully to the Scottish Law Commission. I stress again that we are not concerned with arrears. Where mistakes have been made and an unnoticed casualty has become due, that is not affected. We are concerned only with the future right to claim casualties.

The bill proposes to take away that right from landlords. There was little doubt in our consultation that the casualties should, because of their nature, be abolished. The difficult issue, which underlies Gordon Jackson's point, is compensation. That was the question that the commission found extremely difficult in relation to the rental value casualties—small duplicands are no problem at all.

We considered every scheme of compensation that we could think of that would be consistent with abolishing those archaic rights. In the end we concluded, given the oppressive nature of the exaction and the legal uncertainties and practical difficulties that surround such claims, that they had no value that was worthy of compensation as part of a reform package. As I said, we were not concerned with valuing specific rights to casualties in specific cases; we were concerned with devising a package that could be used across the board.

That was our conclusion—which I think will be all right from a human rights point of view. Under protocol 1 of the ECHR, a state enjoys considerable discretion in controlling the use of property rights. A specific use of a property right—in this case the landlord's right—may be regarded as being contrary to public policy, as this type of claim has been regarded since 1874 and earlier. In relation to feudal casualties, it was recognised in the early 19th century that such claims should be abolished. They have survived in leasehold casualties, but it has been obvious for a very long time that their survival is contrary to public policy. I believe therefore, that the state has discretion under the ECHR to abolish such means for a landlord to exercise rights, and could do so on whatever terms it thought fair and reasonable. Of course, one can never be entirely clear about such matters.

I want to check that the person who buys up the old leases does not set their own charges. Is the formula containing the multiplication factor for the value of the property already set? If a feudal superior charged someone who built a porch on their house, that could be regulated at a land court. Was there a way of appealing against the charge that the landowner imposed through the leasehold casualty?

There was no statutory method, but some leases included a provision for arbitration.

As you said, Dr Clive, it is unusual for an act not to come into force at the time that it gets royal assent. Are there other examples of legislation with a similar provision?

There are examples, but I cannot think of the name of such a piece of legislation offhand.

I appreciate that it is quite difficult. Have you concerns about the provision, which is unusual?

I would be concerned if this became a common practice. I can see the case for including the provision in this instance—there might be a special reason. Others might be able to respond better, as the proposal was made after I was involved.

You said that there might be a special reason. I take it that that means that you cannot see one.

I suppose that the reason was the one given by Mr Ingram in the previous discussion—there was a fear that there would be a rush of claims by landowners to take advantage of the gap before the legislation came into force. The commission considered that point in relation to the irritancy provision in section 5, but we concluded that there was no real risk of that because the court has sufficient common-law powers to deal with abuse of the irritancy provisions. We did not think that backdating would be necessary. I cannot say much more, as this relates to matters that we were not involved with.

What would your suggestion have been for the time at which this would become enforceable?

As set out in the report, our position was that the provision should commence on the date of royal assent in the normal way.

Does that remain your position?

Yes.

I want to clarify what has been said about compensation. The point has been made that the only type of casualty that has any significant value is one that is based on a rental value when there is a singular successor. Is the compensation much less than what a person who would be entitled to that casualty would receive if the bill were not enacted?

It is difficult to give a comprehensive answer, because casualties are different.

But the sum would not be bigger.

It is unlikely to be bigger, but it might be. I say that because there are casualties where the landowner might never get a penny. The property might be owned by a church or a company and never change hands. There cannot be a general answer; in such a compensation scheme, there has to be a somewhat rough system.

I do not want to put words in your mouth, but I think that you are saying that, in a significant number of the cases, the compensation would be much less than the owner of the casualty would normally expect to receive.

That is correct. It depends on the assumptions that we make. If the owner retained the casualty and the property changed hands every so often, the owner would undoubtedly get more. If we examined the market value of the rights to casualties, the position would be different. I am not sure what people would pay for the right to exact a particular rental value casualty from the succeeding tenants of a property, but I suspect that they would not pay much.

The report describes leasehold casualties as "archaic, anachronistic and undesirable". What happens when a lease of 999 years expires?

The property reverts to the landlord. That is the bigger horror that underlies the situation.

I know that 999 years from now is a long way away, but do you feel that that situation is also archaic, anachronistic and undesirable? Should we be doing something about it?

As I am no longer a member of the commission and am free to speak my mind, I can say that I think that the situation is bad and is in urgent need of reform.

I do not know how urgent the situation is, but I take the point.

I am interested in how the compensation is calculated. As you say, some properties might never change hands and others might change hands every five years. I should have asked this question of the previous witness, but perhaps you will know the answer. The keeper sometimes bought out casualties. Do you know how that was done and what formula was used?

I do not.

That is a pity, as that information would help to answer the main question.

I thank Dr Clive and Mr Dods for attending.

Our next witness is Mr Brian Hamilton. Mr Hamilton, I know that you have circulated a copy of a lengthy statement. If you read out the whole of that statement, the committee's eyes will glaze over and we will not be able to take in all the points. Therefore, I ask you to confine your remarks to the substantive points. You have about five minutes.

I will attempt to pick out the substantive points, although it will be difficult. Members have before them my submission to the Scottish Law Commission. They will have noted the narrow range of views that were represented on the advisory group, which I think led to a report that is not objective, certainly in so far as it purports to draw conclusions on the redemption or compensation value of rental value casualties. The report is flawed and flies in the face of easily available evidence.

The report finds that a fair multiplier for a casualty due on assignation is 0.75. Landlords and tenants have been freely and routinely negotiating buy-outs of casualties at a multiplier of at least 2.5 for the past 11 years. There has never been a compulsitor on either tenant or landlord to agree a buy-out—they can accept the situation and agree to pay money the next time there is a casualty—but, if they want to end the situation, a multiplier of 2.5 or 3 has usually been what they have agreed between themselves. Scores of examples are readily available. If the committee wants proof of my statement, I can arrange for that proof to be delivered. The Keeper of the Registers of Scotland knows that it is true, because the discharges between landlord and tenant are recorded in his register. He could have brought that information to the Scottish Law Commission when he was sitting on the advisory group.

There has been mention of the Feudal Casualties Act 1914, which abolished casualties in feu charters. Section 5(b) states that 2.5 would be the multiplier for the casualties that we are talking about today. However, there would never have been a feudal casualty so onerous as what we are discussing today, and I have never come across such an example.

In my view, the Scottish Law Commission's report is absolutely worthless on the redemption value and compensation value of the casualties, and bears no relation to what is happening. That is because no alternative views were available to the commission. It could have approached us and asked, but it did not—it knew what it was doing.

The proposal is to substitute the rental value clause in a lease with the stated ground lease. Mr Ingram suggested in the committee meeting of 11 September that the highest compensation that was likely to be paid would be about £60. In some circumstances, a landlord might get £6,000 every seven years or so. That is not compensation—it does violence to the English language to call £60 compensation. It is confiscation; it cannot be anything else.

The bill's sponsors may be in trouble with European law. I am not a lawyer, but I think that we have to distinguish between the situation that we are discussing today and the Duke of Westminster case. The duke got knocked back because he was asking too much, according to the court. However, he was getting something. He lost his case because he wanted a lot more than the law would allow.

At the 11 September meeting, Mr Jackson came close to the truth when he asked Professor Rennie about proportionality, as recorded in the Official Report at column 1697. If we accept Professor Rennie's short summary of the Duke of Westminster case, the compensation level should perhaps be the value of the ground without the building on it. The removal of the casualty clause from a lease takes away the whole value of the assets of the landlord, who will have nothing left. I own 36 houses in Boghead and Kirkmuirhill. The annual rent would not take my wife and me out to dinner for a night. We have no assets in the property apart from the casualty value.

I cannot see how Mr Ingram's proposal can be described as compensation. If we take the stance that all property is theft and say, "We're having it off you," that is fine—I can live with that. If that is the political line, it only has to be said and we need not have the whole discussion about compensation and great long tables that will hardly be used. I cannot imagine any landlord collecting any of the compensation that is proposed. It is too expensive to collect such payments. I could go on, but it might be better if I let members ask questions.

Yes, we will come to questions now. Can I first pick you up on some—

May I just say one thing first? While we are talking, members might want to read through the written statement that I supplied. Members may wish to pick me up on several points.

I am sure that we will try our best.

You talked about the possibility of our wanting to adopt the maxim that all property is theft. I suspect, however, that people would prefer to adopt the maxim that all leasehold casualties are theft. They have the view that, although it might be legal for people to do what you have done, it is hardly very moral, as leasehold casualties have gone into desuetude and you came across this only through your interest in this area of law.

People think that this law is not moral because there has been a break of 90 years in which no one has picked up the fact that it is possible to collect leasehold casualties. Had there not been that break, people would not have used the morality argument and would have lived with the situation. I believe in the sanctity of a contract. People make a deal and they stick to it. I made a deal and bought an estate. It cost a lot of money; now you are taking it off me.

I have three questions. You mention making a deal and sticking to it. A lot of ordinary people thought that they made a deal—to lease a property—only to find out—

Well—

Can I finish? I am not just getting at you, Mr Hamilton. A lot of landlords have made a killing from ordinary people, who have lost their homes because of leasehold casualties. They thought that they had a deal with the other side. Do you not think that it is about time that that human suffering stopped and that we got rid of leasehold casualties for the sake of ordinary people?

I can see that society has developed and, as society develops, we change our rules and regulations. However, we do not normally do that at one individual's expense. Normally, when we decide that we need to make a change in society, we do not put all the burden of that change on one person. On this occasion, it is a matter of just a few people, and it is easy for you to make a change.

You said that the tenants thought that they had a deal. They had a lease, which was set up in, say, 1820. The lease was then assigned—people bought the rights of the lease. What we are dealing with is therefore not the previous tenant, but the deal that was set up in 1820, which has been taken over by various people. Tenants change and landlords change.

We have heard a lot this morning about the fact that lawyers should have got this right and should have advised their clients that a clause was in desuetude. You have mentioned that in the past. Were you relying on the fact that you knew that lawyers were missing casualty clauses?

I will tell you what happened. The estate was offered to me in 1994. At that time, I knew nothing whatever about feudal casualties. I did not know that the Keeper of the Registers had already settled with the Duke of Hamilton in 1990—while I was still sitting in conveyancing classes at the University of Aberdeen—for about £70,000; I did not know that the keeper had also settled with the people who owned the estate at Wishaw.

I, too, have done conveyancing. You are on record as saying that you have simply taken advantage of loopholes in the law and that lawyers should get their act together.

Not loopholes—a loophole is something that could not reasonably have been foreseen. The casualty clauses in the leases are as clear as day. The reason that they were missed was shoddy conveyancing. Lawyers do not have to know everything, but they have to know that when they do not understand something, they ask somebody else.

With respect, that was not the question that I was asking. I am clearly not going to get an answer. I am asking whether you were relying on your knowledge that lawyers often missed casualty clauses in leases. If you do not want to give me an answer to that, that is fine.

I will give an answer. I will not dodge the question.

Well, I would like an answer.

My answer is that when I bought the estate I knew nothing about casualty clauses. I learned as I went. I read the lease and I asked, "What does this mean?"

My final question is on compensation. Some other parties, notably Cameron Fyfe of Ross Harper and Murphy have told the committee that the bill should not compensate landlords at all, although we know that it will offer some compensation. The argument has been made that landlords have been receiving casualties for nothing in return. What are landlords doing in return for their casualty payments?

Landlords own the land. You can equate a casualty clause with the modern rent review clause. What does the landlord do to justify a high rent in a modern rent review clause? Absolutely nothing. Are you going to destroy the pension industry by abolishing rent review clauses? The principle is the same. You are saying that you believe that the casualty clause should be abolished and I think that you are saying that it should happen without compensation.

No, I am quoting Cameron Fyfe from Ross Harper and Murphy, who asked the committee to consider the argument that there should be no compensation because the landlord does nothing.

Is that Mr Ross Harper who is a professor of law?

It is Cameron Fyfe of Ross Harper and Murphy.

Of course, he has a personal interest in this. He has made his mistakes, along with Professor Robert Rennie of the Law Society of Scotland, and had to compensate people. We have a situation in which one bunch of lawyers is changing the law to protect another bunch of lawyers. This legal campaign is really about protecting professional indemnity insurance premiums.

You said that you made a deal, but in fact the deal had long since been made by one of your predecessors with the predecessors of some of the existing tenants.

Do you mean the lease?

Yes, in the purchase of the original estate. You said that you did not know about casualty clauses when you purchased the estate.

Correct.

In fact, any income that you are entitled to as a result of those clauses was a windfall. Does not that reduce any moral—if not legal—entitlement that you might have to enforce them?

You could argue that. However, I lost other things that I thought that I was getting. I do not know the word to describe the opposite of a windfall but, when you buy an estate like the one I did, you do not know what you are getting.

Brian Hamilton mentioned me before, but he must never assume my concluded view from my questions.

I am not without sympathy on this matter. You heard the question that I asked Dr Clive about someone who buys an estate in good faith and says, "That is what I am going to get and I will pay a price for it", only to find that the income from the casualty is taken off them. I understand that, but let me ask you this even more bluntly than the convener did: when you bought the estate, did you pay a price for it that reflected in any sense the value as you now calculate it of the leasehold casualties? I am not asking what you paid for the estate; no doubt we can find out. Did you pay the money expecting to get the casualties, or did you pay a price for the estate that did not take them into account at all?

I want to be sure that I understand the question. Are you asking whether I factored in an expectancy of money from the casualties?

No, you may have factored it in because—

If that is your question, the answer is no.

I was going to be even more direct. You did not factor it in, but it is possible to factor it in and still not pay the price because the other side has not factored it in. I am asking whether the price that you paid reflected the value.

Do you mean the value of the casualty? As I said, I knew nothing about casualties when I bought the estate. I found them afterwards.

So the price—

I was looking at leases and I said, "What does this mean?"

So the price you paid for the estate, and therefore the amount that the person you bought it from received, took no account of the value of the casualties.

Correct.

I boldly go here, because I am a registered member of the Law Society of Scotland. I want to take up an issue from your statement. You appear to be saying that the momentum for the bill simply comes from the legal profession covering its back.

That accounts for most of the momentum. Other forces are involved.

I put it to you that perhaps one of the other forces is that circumstances have changed, as they do over a long period. As I understand it, these casualties came about because land was entailed, and—bear with me, and correct me if I am wrong—these leases were set up to get round entailment. Now that land is no longer held in that manner, do you not see that there is a policy reason—which is nothing to do with you as an individual; you have done us a service by showing us something in law that needs to be remedied—why the law needs to be changed to take account of changing circumstances of land ownership? That is what the bill is about. It is not about depriving you or others; it deals with something in law that requires to be changed as a matter of policy. This is not a personal conflict between the legal profession and Brian Hamilton.

You made two points. Entailment is a red herring. I can show you examples of leases, feu charters and dispositions on many estates. I do not know what branch of the law you practise but, if you look at the history of entails, you will see that the first entail act was in the late 1600s. Since then there have been all sorts of watering down. There was the Entail Amendment Act 1848, referred to as the Rutherford act, and the Entail Improvement Act 1770, referred to as the Montgomery act. I will not bore you with all the details, but entails were so watered down that they were ineffectual if an owner in possession wanted to lease or feu. The entail story is a red herring.

Let us put that to one side. Do you accept that our policy view of land ownership has changed, mercifully, in 2000? We have abolished feudal tenure. In the same manner, this issue, which you have highlighted, has arisen and has to be addressed because of our views on land ownership. The bill does not represent a personal vendetta; it is a matter of changing land policy and land ownership.

I accept that the law has to change as society changes. As I said, if you find that you have to take away someone's property for the public good, you should not make that individual suffer for the public good. I accept that laws have to be changed.

Before I ask Adam Ingram to speak, Christine Grahame properly declared an interest. If anyone else has an interest, they should declare it when they speak.

Is that remark pointed at me?

No, you just happened to be next.

Brian, you indicated that the rental that you received from your properties in Boghead was minimal. How much income have you derived from casualty payments since you purchased the estate?

Did you get a copy of my paper to the Scottish Law Commission?

Yes, we did.

I cannot remember the figure, but it is not much different from the figure that appeared in that paper. It is something like £27,000. What does it say in the paper?

It says £27,058.

What is the date of that?

It is dated 5 May 1997.

Then I think that the figure is still correct; as I think I say in the letter, we have just a few properties left with a casualty provision on them. By and large, those numbers hold good.

If the bill is passed, how much income will you forgo?

I was thinking about that this morning. I have three properties with casualty clauses on them. One is the smallest hairdressing shop anyone is ever likely to see—it is about 8 ft by 8 ft. If it were ever to change hands, it might attract a casualty of £500. One house might attract a casualty of about £2,000 and the other might attract a casualty of £5,000 or £6,000. That is the sum total of my interest.

Have all the other casualties been bought out?

Yes, they have. You could say that I am here in an almost academic capacity. I have very little financial interest in casualties now. If they are abolished, it will not really affect me.

Quite a lot of my concerns have been dealt with. I wanted to get a picture in my head of the estate. Is it a street of houses?

The estate was part of a larger estate, which was the Duke of Hamilton's land. In the 1650s, it was about 14,000 acres, but the land was gradually sold off. When I bought it, I took what I could find. Before the owner sold the land to me, he took out whatever could be given a clear value—sites and so on. I took a gamble. If anyone really wants to know—it is in the register—I paid £30,000 for the land, hoping that I would find something. I might have found nothing at all, in which case I would have been £30,000 down.

Have you nothing apart from the income from the leasehold casualties? Is there no other income?

From the estate?

From the estate.

What did we have? We found two building sites—abandoned land—and various bits and pieces of that sort. There were no superiorities or feu charges. There are bits of land that have been forgotten about. We have had to examine the maps.

It is a lot of parcels of land.

We had another claim against the Keeper of the Registers, who made a mistake in a similar hearing and paid us £37,500 after a long-running battle. I offered to settle at £25,000 in 1994, but the keeper took it to the courts. Under section 13 of the Land Registration (Scotland) Act 1979, the keeper will have to pay around £200,000 by the time all the legal expenses are picked up.

So you do have other income from the estate?

A small bit of income, but there are an awful lot of expenses. If you are talking about profit, there has been very little.

You were honest when you gave us the figure of £27,000 that you have made from leasehold casualties—thank you for that. Does that include money that you have received as a result of challenging the keeper?

No. I have received nothing from the keeper. If you examine the table in the Scottish Parliament information centre research paper on the bill, you will see that the case is on-going. I have received nothing from the keeper in relation to casualties yet.

I have one final question. You said that you paid money for the estate on the basis that you thought that something might turn up. Given that you did not know about leasehold casualties at the time, what sort of thing did you think would turn up?

Vacant bits of ground. We found a couple of building sites. There is also a small field, which might have some value in the future, depending on local planning policy. Members may also be aware of the Auchenheath schoolhouse case. The house belonged to the estate. The local authority sold it on a defective title, although it should have returned it to the estate when it was finished with it. We had to litigate to get it back.

Thank you for your attendance, Mr Hamilton.

I ask members to take note of the last section of my notes, about the proposed change in the law. I have spoken to Micheline Brannan about it.

I am sure that members will read all your documents, as we have your previous ones.

Thank you.

Our next witnesses are from the Scottish Executive. Micheline Brannan is from the justice department and Stuart Foubister is from the office of the solicitor.

Micheline will tell us briefly why the Executive supports the measure.

Thank you, convener. Mr Ingram's bill will abolish a system whereby people who hold properties on long leaseholds are liable to make extra payments at regular intervals or on the occurrence of specific events. Because liability for unclaimed payments passes with the lease, owners in some parts of Scotland were faced with demands for large arrears, which they did not expect when they bought the property. In some cases, severe distress was caused to owners. For that reason, the previous UK Administration referred the matter to the Scottish Law Commission. A report was received, but parliamentary time was not found at Westminster.

The Executive supports the policy behind the bill, which is to abolish liability to pay leasehold casualties or arrears, and was delighted when Mr Ingram indicated his intention to introduce the bill. Mr Ingram has, on advice, made three changes to the bill from what the Scottish Law Commission recommended. They were so well described by Dr Clive that there is no need to repeat them.

I hope that that is enough of an explanation.

What is the Executive's attitude to compensation, which is one of the extra measures that were put in? What is the attitude to Mr Hamilton's argument that in particular rental cases in which he has an interest, the compensation is unlikely to match the income that he and other people in his situation might reasonably expect to receive from the casualties, albeit that casualties are variable and an average cannot be predicted?

My understanding is that under the European convention on human rights, compensation must be proportional to the loss—it does not have to be at market value. My understanding is also that while rental value casualties might provide somebody with an income, the income stream would not be a sufficiently reliable way of making one's living to give it a large market value. Strictly speaking, a casualty might have a large market value, but the unreliability and the prospect that the system could be abolished at any time would make it a not very marketable commodity. Mr Foubister might like to bring some legal expertise to that answer.

I will do what I can. Aspects of the ECHR, such as article 1 of protocol 1, require a balancing exercise. On one side of the scale is the greater public interest, which the measures are intended to serve. On the other side is the disproportionate impact that the measures might have on an individual who is prejudiced by them. The position is by no means black and white. All sorts of factors need to be weighed up—the price paid for the estate by the landowner, his expectations and his input in return for payments, as well as the interests of the tenants—to set the level of compensation that tenants are required to pay.

The point is that while the amount that people receive now is variable, under the proposed formula, it is not variable and it is unreasonably low. It is not proportionate.

It is in no way a market value figure as regards rental values. That is accepted. Our feeling is that that is defensible in ECHR law, given the public interest element in what is being done.

I hear what you say about proportionality. It might be more than nominal compensation, but is not it pretty nominal compared with what certain parties could get in compensation?

It is nominal. There is policy behind that. The SLC considered that there should be no compensation for rental value casualties. In the Executive's view, that went too far; the balance has been struck near the nominal level. That is partly to reflect the fact that the landlord is benefiting from investments made by successive tenants over the years, which have increased the rental value of the property. The landlord has not provided anything.

I hear what you say. I am pretty sure that Mr Hamilton will raise ECHR challenges when the bill becomes law—he strikes me as that kind of gentleman. What would be your prospects of success in resisting that challenge?

I do not think that we would like to speculate.

We as an Executive would not support a bill if we thought that the prospects of winning were not better than 50 per cent.

I was looking for a percentage—a proportion—of your prospects of success in resisting the challenge.

Dr Eric Clive raised an interesting issue about the date when the bill comes into force. Have you any reservations about that provision being in the bill, as legislation usually comes into force when it receives royal assent?

It is not always true that bills come into force when they receive royal assent. Sometimes they are commenced by order, which takes some time.

But not earlier than the date when they receive royal assent.

It is unusual, but it is not unheard of. The Mental Health (Public Safety and Appeals) (Scotland) Act 1999 was an example of legislation some aspects of which were retrospective. We can assure you that, because that is unusual, every case is given careful attention to ensure that proceeding in that way is justified. On this occasion, the desire was to avoid a situation in which the bill was introduced, but its progress was not fast, so that there would be several months during which a person with unclaimed casualties could take steps to claim them.

I hope that that provision might be included in other bills when progress is not fast.

Do members have any further questions?

I thank Micheline Brannan and Stuart Foubister for their attendance.