Some five weeks after Lord Gill issued his judgement in the Moonzie Rent Appeal, he issued his equally long-awaited judgement in the appeal from the Land Court in respect of one of the now infamous limited partnership cases arising from the “night of the late notices”, 3 February 2003.
As in Moonzie, Lord Gill was critical of the draftsmanship of the offending parts of Section 72 of the Agricultural Holdings (Scotland) Act 2003 (“the 2003 Act”) and also found, on a proper construction of these parts of Section 72, that the Land Court had erred in dismissing Mr Salvesen’s original application. However, in the current appeal Lord Gill went one step further and found that Section 72 breached Mr Salvesen’s rights under the European Convention on Human Rights and was therefore outwith the legislative competence of the Scottish Parliament!
The facts of the case relate to the termination of a limited partnership arrangement during the passage through Parliament of the Bill which eventually became the 2003 Act. At the time the notice terminating the limited partnership was served it was entirely lawful to do so and within the contractual right of the limited partner. Unfortunately, Parliament took a dim view of this course of action and introduced Section 72 which quite clearly was designed to penalise those land owners who had interests in limited partnership arrangements and who had attempted to terminate those arrangements during the period 16 September 2002 to 30 June 2003. While Section 72 was enacted as an anti-avoidance measure, it went much further than the classic anti-avoidance measures, which normally seek simply to nullify the benefit gained by the avoiding action, and put the land owner in a manifestly worse position than he would have been in if the notice had been served before 16 September 2002 or after 30 June 2003.
While the decision in Moonzie has a much wider application, the decision in Salvesen is only likely to affect a relatively small number of land owners. For those land owners who were eagerly awaiting the outcome of the appeal before having to take any action, they can breathe a huge sigh of relief, although quite how Parliament proposes to resolve the situation remains to be seen. For those land owners who found themselves in the unenviable position of more or less being forced to agree a compromise solution with their former general partner rather than challenge the inequity of Section 72, we can but hope that they do not have too long to rue their decision to serve that notice!