Scottish Civil Law Reports, Issue 5, October 2016

Evidence— Treatment of English law Advocate General for Scotland v Murray Group Holdings Ltd (IH) 485

603

Judicial review— Planning—Natural justice Glenmorie Wind Farm Ltd, Petitioner (OH)

619

Parent and child— Contact—Duties of appeal court EM v AM (IH)

571

Permanence order—Threshold test KR v Stirling Council (IH)

557

Process— Appeal—Competency—Winner appeal Secretary of State for Work and Pensions v Robertson (IH) 522

Reparation— Whether employer liable to the pursuers for failures by contractors Esso Petroleum Co Ltd v Scottish Ministers (OH) 539 Revenue and Customs— Income tax—Pay as you earn—Payment into trust Advocate General for Scotland v Murray Group Holdings Ltd (IH) 485 Solicitors— Professional misconduct—Totally without merit McSparran McCormick, Appellants (IH) 585 Town and country planning— Natural justice Glenmorie Wind Farm Ltd, Petitioner (OH) 619

SCOTTISH CIVIL LAW REPORTS

Immigration— Leave to remain—Provision of evidence Nawaz, Petitioner (IH)

October 2016 2016 S.C.L.R. 485−642

New grounds of appeal Advocate General for Scotland v Murray Group Holdings Ltd (IH) 485

2016 S.C.L.R. 485–642

Scottish Civil Law Reports Edited by Sheriff Michael J Fletcher Advocate General for Scotland v Murray Group Holdings Ltd (IH) 485 EM v AM (IH) 571 Esso Petroleum Co Ltd v Scottish Ministers (OH) 539 Glenmorie Wind Farm Ltd, Petitioner (OH) 619

*657945*

KR v Stirling Council (IH) 557 McSparran McCormick, Appellants (IH) 585 Nawaz, Petitioner (IH) 603 Secretary of State for Work and Pensions v Robertson (IH) 522

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A COURT OF SESSION

4 November 2015

Inner House (Second Division) Lord Justice Clerk (Carloway), Lord Menzies and Lord Drummond Young ADVOCATE GENERAL FOR SCOTLAND

Appellant

B

against MURRAY GROUP HOLDINGS LTD MURRAY GROUP MANAGEMENT LTD THE PREMIER PROPERTY GROUP LTD GM MINING LTD RFC 2012 PLC (in liquidation) (formerly The Rangers Football Club plc)

Respondents

C

Revenue and customs—Income tax—Pay as you earn—Payment by employer to trust, which paid to sub-trust for beneficiaries chosen by employee—Sub-trust lending sum to employee—Whether payment emolument or earnings—Treatment of English law—Income and Corporation Taxes Act 1988 (c.1), s.1, Sched.E—Income Tax (Earnings and Pension) Act 2003 (c.1), ss.6, 7, 62—Income Tax (Pay As You Earn) Regulations 2003/2682 D Process—Appeal—New grounds of appeal—Whether competent to argue grounds of appeal not argued in courts below Evidence—Treatment of English law Section 62 of the Income Tax (Earnings and Pensions) Act 2003 provides, inter alia: “(2) …‘earnings’, in relation to an employment, means— (a) any salary, wages, or fee, (b) any gratuity or other profit or incidental benefit of any kind obtained by an employee if it is money or money’s worth, or (c) anything else that constitutes an emolument of the employment.

(3) For the purposes of subsection (2) ‘money’s worth’ means something that is— (a) of direct monetary value to the employee, or (b) capable of being converted into money or something of direct monetary value to the employee.”

HM Revenue and Customs made assessments of tax on the respondents in relation to sums paid to employees through the medium of trusts set up to avoid tax. The respondents appealed against the assessments to the First-tier Tribunal and their appeal was upheld by a majority. The appellant appealed to the Upper Tribunal, which refused the appeal but granted permission to appeal to the Court of Session on one ground. The appellant duly appealed.

The fifth respondents RFC 2012 plc were the only party opposing the appeal; the first to fourth respondents were in liquidation.

E

F

G

485

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C

D

E

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G

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The scheme involved the employer making payments to a trust which was known as Employees’ Remuneration Trust (the Principal Trust). The paying company recommended the trustee to resettle the sum in question to a subtrust and would ask that the income and capital of that sub-trust should be applied in accordance with the wishes of the employee. The beneficiaries of the sub-trust were chosen by the employee and were generally the members of his family. The First-tier Tribunal held that the trustee of the Principal Trust had a genuine discretion as to how to apply the funds advanced to it, and the settlement onto the sub-trust merely represented the exercise of that discretion.

Thus, the benefit enjoyed by the employee and his family resulted from the exercise of a discretionary power by the trustee of the sub-trust. Such a payment was not a payment of emoluments or earnings and was therefore not subject to income tax.

HMRC contended that that interpretation of the transaction was wrong and that the cash payment made by the employing company to the trustee of the Principal Trust was in consideration of services by the employee, and thus had been earned by the employee. It was part of the remuneration package of the employee comprising salary and bonuses and had been earned for work done. The monies had been merely redirected to another person. HMRC also argued that the employee was able to exercise his powers in such a way that the whole of the funds of the sub-trust were paid to him and the amount paid into the sub-trust should be treated as at the absolute disposal of the employee and hence part of his emoluments or earnings. Tax should have been deducted by the employer and paid to HMRC and under the PAYE regulations they were due to make payment of the tax.

The appellant appealed the decision of the Upper Tribunal on two grounds.

First, it contended that the payment of monies by the relevant employer to the Principal Trust, or alternatively the appointment of monies by the Principal Trust to a sub-trust set up for the benefit of an employee, constituted a payment of taxable earnings, taxable in the hands of the employees whose services were so rewarded. The scheme therefore amounted to a mere redirection of earnings which did not remove the employee’s liability to income tax. Secondly, it contended that when monies were appointed by the trustee of the Principal Trust to the relevant sub-trust, that appointment was made in such a way that those monies were at the unreserved disposal of the employee, who was appointed protector of the sub-trust, and hence constituted a payment of taxable earnings taxable in the hands of the employee. Powers were conferred on the protectors under the deeds constituting the sub-trusts, including a power to alter the trust purposes. That could be used in such a way that the only beneficiary was the employee. In that way the funds were at the employee’s unreserved disposal.

Counsel for the respondents contended that no error had been demonstrated in the reasoning of the First-tier and Upper Tribunals. Those were specialist tribunals and the court should be slow to interfere with their decisions. The argument for the appellant based on the proposition that the payments made into the trusts and as loans were mere redirected payments of emoluments or earnings, had not been put to the tribunals and therefore should not be entertained at this stage of the appeal. In any event, the redirected payment principal had no application because there had been no payment of money or money’s worth to any employee.

The court considered three preliminary matters: (1) whether it was competent for the court to consider a ground of appeal which was not argued before either the First-tier Tribunal or the Upper Tribunal; (2) it considered the issue relating to the powers of an appellate court on a statutory appeal under ss.13 and 14 of the Tribunals, Courts and Enforcement Act 2007, in particular relating to the question of what the expression “on any point of law” encompassed; and (3) the extent to which, in an appeal under ss.13 and 14, the Court of Session should deal with questions of English law: whether it may

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take judicial notice of English law, or whether, as in ordinary private law proceedings, English law must be treated as a question of fact, with the result that the findings of the First-tier and Upper Tribunals would be binding.

Held (1) that it was competent for the court to entertain a ground of appeal that had not been argued in the First-tier or Upper Tribunals, although it would have been slow to have done so in any case where additional findings of fact were required and would not have done so had unfairness resulted (para.39); (2) that the issues in the instant case were: first, the scope of the redirection of earnings principle, and its application to the particular facts of the case; and secondly, the application of the Ramsay principle by reference to the powers of the protector of a trust: in particular, the question had been whether a protector could exercise those powers to secure a benefit for himself and these raised clear questions of law and to the extent that legal principles had been misapplied the court could have and had to interfere with the decision of the First-tier Tribunal (para.48); (3) that in the instant case the proceedings were initiated in the First-tier Tribunal and the first appeal was heard in the Upper Tribunal and both of those tribunals have UK-wide jurisdiction and both of them had judicial knowledge of English law and therefore the court had judicial knowledge of English law (paras 49, 50); (4) that the fundamental principle derived from the authorities was that if income was derived from an employee’s services qua employee, it was an emolument or earnings, and was thus assessable to income tax, even if the employee requested or agreed that it be redirected to a third party and it was imperative in applying this principle to the facts of a particular case to determine the true nature of the transaction viewed realistically (paras 56, 58); and (5) that the primary argument presented for the appellant was correct and the payments made by the respondents to the trustee of the Principal Trust in respect of employees were emoluments or earnings, and were accordingly subject to income tax and furthermore, those payments were made at the time of payment to the trustee of the Principal Trust, with the result that the obligation to deduct tax under the PAYE system fell on the employer who had made such a payment (para.66); and appeal allowed on the first ground advanced by the appellant.

Forde & McHugh Ltd v Revenue and Customs Commissioners [2012] EWCA Civ 692; [2012] S.T.C. 1872; [2014] UKSC 14; [2014] 1 W.L.R. 810 and Edwards v Roberts (1934) 19 T.C. 618 distinguished.

Sempra Metals Ltd v Revenue and Customs Commissioners [2008] S.T.C. (S.C.D.) 1062 not followed.

A

B

C

D

E

Cases referred to: Aberdeen Asset Management plc v HM Revenue and Customs [2013] CSIH 84; 2014 S.C. 271; 2014 S.L.T. 271 A H (Sudan) v Secretary of State for the Home Department [2007] UKHL 49; [2008] 1 A.C. 678; [2007] 3 W.L.R. 832; [2008] 4 All E.R. 190 Barclays Mercantile Business Finance Ltd v Mawson [2004) UKHL 51; [2005] 1 A.C. 684; [2004] 3 W.L.R. 1383; [2005] 1 All E.R. 97; [2005] S.T.C. 1; 76 T.C. 446 Bristol and West Building Society v Mothew [1998] Ch. 1; [1997] 2 W.L.R. 436; [1996] 4 All E.R. 698 Brumby v Milner [1976] 1 W.L.R. 29; [1976]1 W.L.R. 1096; [1976] 3 All E.R. 636; [1976] S.T.C. 534 Collector of Stamp Revenue v Arrowtown Assets Ltd [2003] HKCFA 46 Collins v Revenue and Customs Commissioners [2009] EWHC 284 (Ch); [2009] S.T.C. 1077; (2009) 79 T.C. 524

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Dextra Accessories Ltd v Macdonald [2005] UKHL 47; [2005] 4 All E.R. 107; (2005) 77 T.C. 146 Edwards v Bairstow [1956] A.C. 14; [1955] 3 W.L.R. 410; [1955] 3 All E.R. 48 Edwards v Roberts (1934) 19 TC 618 Forde & McHugh Ltd v Revenue and Customs Commissioners [2012] STC 1872 (CA); [2014]. 1 WLR 810 (UKSC) Garforth v Newsmith Stainless Ltd [1979] 1 W.L.R. 409; [1979] 2 All E.R. 73; [1979] S.T.C. 129 Hadlee v Inland Revenue Commissioners [1993] A.C. 524; [1993] 2 W.L.R. 696; [1993] S.T.C. 294 Heaton v Bell [1970] A.C. 728; [1969] 2 W.L.R. 735; [1969] 2 All E.R. 70 Inland Revenue Commissioners v City of Glasgow Police Athletic Association, 1953 S.C. (H.L.) 13; 1953 S.L.T. 105 Inland Revenue Commissioners v Fraser, 1942 S.C. 493; 1942 S.L.T. 280 Miskovic v Secretary of State for Work and Pensions [2011] EWCA Civ 16; [2011] 2 C.M.L.R. 20 Procter & Gamble UK v Revenue and Customs Commissioners [2009] EWCA Civ 407; [2009] S.T.C. 1990; Ramsay (W T) Ltd v Inland Revenue Commissioners [1982] A.C. 300; [1981] 2 W.L.R. 449; [1981] 1 All E.R. 865 Representation of Centre Trustees (CI) Ltd, Re [2009] JRC 109; 12 I.T.E.L.R. 720 Scottish Provident Institution v Inland Revenue Commissioners [2004] UKHL 52; 2005 1 S.C. (H.L.) 33 Sempra Metals Ltd v Revenue and Customs Commissioners [2008] S.T.C. (S.C.D.) 1062 Sloane Robinson Investment Services Ltd v HMRC Commissioners [2012] U.K.F.T.T. 451 Smyth v Stretton (1904) 5 T.C. 36 Special Commissioners of Income Tax v Pemsel [1891] A.C. 531 UBS AG v Revenue and Customs Commissioners [2013] S.T.C. 68.

The full circumstances of the case and the arguments of counsel are to be found in the following opinion of the court which was delivered by Lord Drummond Young on 4 November 2015.

LORD DRUMMOND YOUNG [1] The respondents are members of a group of companies whose ultimate parent company is Murray International Holdings Ltd. The first respondent is a subsidiary holding company, and the other four respondents are members of what is referred to as the Murray Group of companies. In tax years from 2001/02 to 2008/09 the respondents entered into a series of transactions pursuant to a scheme designed to avoid the payment of income tax and National Insurance contributions (NICs) in respect of their employees. Those transactions have resulted in assessments by Her Majesty’s Revenue and Customs (HMRC) to income tax under the Pay As You Earn (PAYE) system and corresponding NICs.The respondents appealed against those assessments.

Their appeal was heard before the First-tier Tribunal, who on 29 October 2012 upheld the appeal; that was the decision of a majority of the First-tier Tribunal (Mr Kenneth Mure, QC, and Scott Rae, WS); the third member of the Tribunal, Dr Heidi Poon, CA, dissented. The appellant appealed to the Upper Tribunal (Lord Doherty), which on 8 July 2014 refused the appeal and on 22 August 2014 granted permission to appeal on one ground to the Court

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of Session. Following that determination the appellant, who represents HMRC, has appealed to the Court of Session. The first to fourth respondents are now in liquidation and the fifth respondents, RFC 2012 PLC, are now the only party opposing the appeal. We should note that, although the appeal relates to NICs as well as income tax, it is a matter of agreement that our decision on the income tax issue will apply equally to NICs; consequently the discussion is confined to income tax and the PAYE system.

[2] The scheme as it typically operated may be summarised as follows. The second respondents (hereinafter referred to as MGML) set up a trust known as the Employees’ Remuneration Trust (hereinafter referred to as the Principal Trust). A company in the Murray Group which wished to benefit one of its employees made a cash payment to the Principal Trust in respect of that employee. The paying company recommended the trustee of the Principal Trust to resettle the sum in question on to a sub-trust, and would ask that the income and capital of the sub-trust should be applied in accordance with the wishes of the employee. The beneficiaries of the sub-trust were chosen by the employee, and were generally the members of his family. In practice the trustees of the sub-trusts invariably gave effect to the wishes of the employee.

The employee would be appointed protector of the sub-trust, and the trustee of the sub-trust would then lend the employee the money that had been advanced to the sub-trust from, ultimately, his employer. The First-tier Tribunal held that the trustee of the Principal Trust had a genuine discretion as to how to apply the funds advanced to it, and the settlement on to the sub-trust merely represented the exercise of that discretion. Thus the benefit enjoyed by the employee and his family resulted from the exercise of a discretionary power by the trustee of the sub-trust. Such a payment was not a payment of emoluments or earnings, and was therefore not subject to income tax.

[3] HMRC contend that that interpretation of the transaction is wrong.

They assert that the cash payment made by the employing company to the trustee of the Principal Trust was in consideration of services by the employee, and thus had been earned by the employee. The employee was content to take the risk that he might not benefit if the trustee of the Principal Trust chose not to follow the recommendation of the employer. Nevertheless, the employer arranged for a letter of wishes from the relevant employee to be passed to the trustee of the Principal Trust, and also an application for a loan by the trustee of the sub-trust to the employee. HMRC’s fundamental argument is that the cash payment to the Principal Trust was part of the remuneration package of the employee, comprising salary and bonuses; it had been earned for work done. The only reason that it was said not to be taxable was that it had been paid to someone other than the employee, namely the trustee of the Principal Trust, with a recommendation that the funds be passed to the trustee of the sub-trust. That, it is said, brings into operation the principle that if an employee or self-employed person instructs that payment of money that he has earned through his work should be made not to him but to another person he is still obliged to pay income tax and NICs on that sum. Monies due to him have merely been redirected to another person. The first question for the court is whether that argument is correct. If it is not, HMRC advance a second argument, based on the proposition that the employee as protector can exercise his powers in such a way that the whole of the funds in his sub-trust are paid to him. That is said to bring the Ramsay principle (Ramsay (W T) Ltd v IRC) into operation, with the result that the amount paid into the sub-trust is treated as at the absolute disposal of the employee and hence part of his

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emoluments or earnings. Finally, there is a possible third issue about the application of the PAYE legislation.

[4] We will first set out the facts of the case in greater detail. We will then consider three incidental questions. The first relates to the basis on which an appellant from the First-tier and Upper Tribunals may raise a new argument before the court; that is relevant to HMRC’s first argument, which was not presented before the tribunals. The second relates to the scope of the present appeal, which is an appeal on a point of law only: in particular the extent to which the court can interfere with the decisions of the First-tier Tribunal and the Upper Tribunal. The third relates to the manner in which the Court of Session should deal with questions of English law that arise in an appeal from the Tax and Chancery Chamber: can the court, like the First-tier and Upper Tribunals, treat English law as a question of law, or must it treat it as a question of fact? If the latter is correct, the result will be that any findings on English law by the two tribunals are binding on the court. Thereafter we will consider HMRC’s two principal arguments, and finally the PAYE issue.

Facts General

D

E

F

G

5304.indd 490

[5] The facts as found by the majority of the First-tier Tribunal are as follows.

These are taken from the majority opinion of the First-tier Tribunal (paras 2, 103, 204–208 and 224–233). Representative documentation was also available, and we have had regard to that. At this stage we comment that the facts found by the First-tier Tribunal focused in large measure on the trust arrangements that were set up rather than the source of the funds involved and, most importantly, the reason that they were provided in the first place. It is, however, the findings relating to the latter that are important for our decision. We further note that in her dissenting opinion Dr Poon made a number of additional findings, largely based on the documents before the tribunal. For present purposes, however, we must proceed on the facts as found by the majority; the appeal to the court is on questions of law only.

[6] Murray International Holdings Ltd is the ultimate holding company of the Murray Group, and Murray Group Holdings Ltd, the first respondent, functions as a subsidiary holding company within the group. MGML, the second respondent, provides management services to the companies in the group. The group consists of approximately 100 subsidiary companies involved in trading and other commercial operations; one of the members of the group, the fifth respondent, was the owner of Rangers Football Club. By a deed dated 20 April 2001, referred to as “the definitive deed”, MGML set up a trust known as the Employees’ Remuneration Trust (referred to as “the Principal Trust”). This was subsequently amended by a deed of variation dated 28 January 2002, a deed of amendment dated 29 November 2002, and a deed of amendment and rectification dated 12 October 2005.

[7] The Principal Trust was used as the basis of a scheme involving a large number of sub-trusts for the benefit of the families of employees of certain companies in the group. After the Principal Trust was established, companies in the group other than MGML were allowed to participate in the scheme. In summary, their participation took the following form. The company in question paid monies into the Principal Trust with a direction to the trustees of that trust that a sub-trust should be established and funded for the benefit of the family of one of the company’s employees. In addition, the trustees of the sub-trust made a loan facility available to the employee, at commercial

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rates of interest but on a discounted basis. That would constitute a debt on the employee’s estate, which was perceived as offering inheritance tax advantages on his death. The fundamental purpose of the sub-trust was to benefit the employee’s family, but almost invariably the whole of the trust estate was used to make the loan available to the employee. The employee was appointed protector of the sub-trust, a concept which we consider in detail at paras 78 et seq below. For present purposes it is sufficient to note two matters. First, the office of protector permitted the employee to alter the beneficiaries of the subtrust; in traditional legal terms, it conferred a power of appointment on the protector. Secondly, the protector was empowered to appoint new trustees and remove existing trustees. 108 such sub-trusts were established subsequent to the date of the definitive deed. Each is in the name of an individual employee of a company within the Murray Group. The deeds creating the sub-trusts refer to and adopt the terms of the definitive deed.

[8] The procedure followed when a sub-trust was created was as follows.

When the possibility arose of creating a sub-trust in the name of an employee, the operation of the trust mechanism and the benefits of making use of a trust would be explained to him. The benefits were said to be that the employee could obtain a loan from the relevant sub-trust; this would provide him with a tax-free sum that was greater than a payment of salary net of tax deducted under the PAYE system. The loan would be repayable out of his estate, thus reducing its value for inheritance tax purposes. Further, the employee would be appointed protector of the trust, with extended powers in respect of the trust, but without title to the trust assets. It was further explained that being a protector would not enable the conferring of any absolute beneficial right on the employee himself.

[9] After it was decided that a sub-trust should be created in the name of a particular employee, that employee would be asked to complete a letter of wishes, naming the family members that he wished to benefit on his death, and almost invariably a loan application requesting that monies be advanced on loan to him by the trustees of the sub-trust. The letter of wishes and the loan application would be submitted to the trustee of the relevant sub-trust. A standard form of deed to create the sub-trust would then be provided by Messrs Baxendale Walker, who were specialist advisers to the group on certain tax-related matters. Thereafter the company employing the employee in question would pay a contribution to the Principal Trust which, in the words of the First-tier Tribunal, “at its discretion would set up a sub-trust in name of the selected employee”. Thus it appears that the trustees of the Principal Trust had a discretion as to whether or not to set up a sub-trust in the name of the employee, although the next finding indicates that they invariably did so. That finding is to the effect that the employing company would then advance monies to the trustees of the Principal Trust and “without exception” a sub-trust in the name of the employee was established. In almost all of these cases loans for the full amount advanced from the employer to the trustees of the Principal Trust were granted by the trustees of the sub-trust to the relevant employee, for a term of ten years subject to extension and on a discounted basis.The employees’ general expectation was that those loans would be renewed after ten years. The discount represented LIBOR interest rates fixed at the outset plus 1½–2 per cent. With some limited exceptions none of those loans has been waived and “none of the nominated employees has obtained an absolute right to any part of the capital value of the loan”, an expression which we take to mean that the loan remains repayable. Virtually all of the sub-trusts remain in existence.

[10] The trust arrangements related broadly speaking to two categories of group employees, executives and footballers. Findings are made regarding the

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contractual entitlements of each of those groups. Employees other than footballers had no contractual right to a bonus. A practice had developed within the group, however, to pay annual bonuses on a discretionary basis depending upon the work performance of the employee in question and the profitability of his employing company (para.103(xi)). It was those bonuses that were paid, in whole or in part, through the Principal Trust into a sub-trust. It is noted at para.12 of the First-tier Tribunal’s decision that that system had replaced an earlier system of discretionary annual bonuses paid to senior employees, and that the employing company would “recommend” to the trustee of the Principal Trust that a sum “effectively in lieu of bonus” be paid to a particular sub-trust.

[11] In the case of footballers their contractual terms of engagement were commonly recorded in two documents, one being a contract of employment and the other being described as a side-letter. The latter would provide ordinarily for the constitution of a sub-trust in the name of the footballer, benefiting his family and with the footballer as protector. The Scottish Football Association required players’ contracts to be registered with it, but Rangers Football Club Ltd did not consider it appropriate to have side-letters registered (para.103(xii)). Although, for reasons that are not obvious, this is not expressly recorded in the findings of fact by the First-tier Tribunal, it is clear that the sums paid into a sub-trust, through the Principal Trust, were derived from the employee’s employment arrangements. That is apparent from the fact that the side-letter was regarded as containing part of a player’s contractual terms of employment, and it was the side-letter that provided for the setting up of the sub-trust, into which of course bonuses were paid. Consequently in both cases the payment of bonuses or the creation of trust arrangements resulted from the employment of the executive or footballer in question.

[12] The First-tier Tribunal concluded (para.204) that, subject to limited exceptions, the structures employed were of legal effect; it had not been suggested that they were a sham.They then considered two particular categories of case, which covered the great majority of the payments involved.

Particular categories: executives’ bonuses and footballers’ engagement terms

E

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[13] The respondent companies made payment of bonuses to senior employees (excluding footballers). The First-tier Tribunal accepted (para.205) that those payments were entirely discretionary, without any contractual entitlement.

While the views of the individual employee would be canvassed, he never had an enforceable claim to a bonus or other benefit. The arrangements were described as “very informal”, and at most offered a hope or expectation. If the employee expressed interest, the employer would make a payment to the Principal Trust. In relation to these bonuses, the First-tier Tribunal considered that the benefit amounted to “a mere discharge of an employer’s obligation to an employee”. On that basis they concluded that no tax liability arose. We observe that, although the bonus arrangements may not have been enforceable, it seems self-evident that the only reason that the bonus was paid was the fact that the senior employee in question was working for one of the group of companies and providing services for it. If bonuses had not been paid, the employment would have been significantly less attractive. Any contrary argument seems an affront to common sense.

[14] The footballers employed by the fifth respondents fell to be treated distinctly, and the First-tier Tribunal concluded that their cases fell into several categories (paras 206–208). When the terms of engagement were negotiated, prospective players and their agents focused on payments net of tax, and were

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told that the net payments could be maximised by using a trust mechanism.

Representatives of the fifth respondents gave evidence that such payments could only be afforded by the fifth respondents if the trust mechanism were used. It is stated that a deal would be offered by the fifth respondents on a “take it or leave it” basis. A contract of employment was then concluded; remuneration was paid subject to PAYE and NICs, and an additional sideletter provided for a discretionary trust payment. The tribunal then stated that they considered that the obligation in the side-letter did not amount to an emolument; as with the executives’ bonuses it fell within the description of “a discharge of an employer’s obligation to an employee”.

[15] On these matters we have two observations at this stage. First, the statement that the side-letter provided for a “discretionary trust payment” (at para.208) appears inconsistent with an earlier statement (at para.2) to the effect that employing companies would pay monies to the Principal Trust with a “direction” to the trustees of that trust that a sub-trust be established and funded for the family of a particular employee. Ultimately this distinction is not of great importance; in practice the trustee of the Principal Trust invariably acted in accordance with the employing company’s wishes. Secondly, if the obligation constituted by a side-letter amounts to “a discharge of an employer’s obligation to an employee”, it must have been an emolument or earnings; emoluments are normally paid in order to discharge the employer’s obligation to pay salary or wages or bonus to the employee, and the prior obligation must be in an obligation to pay remuneration of some kind. Consequently we cannot accept the First-tier Tribunal’s reasoning on this matter. In our opinion the payments were, quite simply, bonus payments arising out of the footballer’s employment, but paid to a third party, the trustee of the Principal Trust. Two facts are critical: payments were made by the employer, albeit through a trust mechanism; and those payments were made because of the services rendered by a particular employee in such a way that they enured for the benefit of persons who were, realistically, chosen by that employee, through trust purposes to which he assented.

A

B

C

D

Terms of the trust deeds: Principal Trust

[16] It is not necessary to set out the terms of the various trust deeds at length.

The critical terms are as follows. In relation to the Principal Trust, MGML was defined as “the founder”. The deed makes repeated reference to “the trustees”, and “the original trustees” were defined as Insinger Trust Company Ltd, of St Helier, Jersey. “The beneficiaries” was defined (in cl.1.1.4) as: “the present, past and future employees from time to time of the Founder and the wives husbands widows widowers children step-children and remoter issue of such employees and the spouses and former spouses (whether or not remarried) of such children and remoter issue… PROVIDED THAT no Excluded Person shall be a Beneficiary”.

“Excluded person” was defined in cl.1.1.4.1 and Sched2 as comprising the founder, any person connected with the founder, any participator in the founder, the founder’s parent company or group of companies, and any person connected with any such participator. The declaration of trust, setting out the trust purposes, is found in cl.2.1: “ ‘Subject as aforesaid and subject to cl.10 hereof the Trustees shall during the Trust Period hold the Trust Fund UPON TRUST to apply the income and capital thereof to or for the benefit of all or any one or more exclusively of the others or other of the Beneficiaries in such shares and in

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such manner generally as the Trustees shall in their absolute discretion think fit PROVIDED THAT the Trustees may if in their absolute discretion (they) think fit accumulate the whole or any part of the income of the Trust Fund by investing the same and the resulting income thereof in any investments hereby authorized and adding the accumulations to the capital of the Trust Fund.’ ” Further powers were conferred on the trustees by cl.5.1 and Sched.1. These included a power (cl.1.2.17 of Sched.1): “to appoint any part or all of the Trust Fund on the trusts of any other existing settlement and to declare trusts of a new settlement whomsoever the Trustees thereof may be PROVIDED THAT the trusts thereof shall not permit the payment of any Prohibited Benefit nor any other sum or benefit the provision of which is prohibited by clause 10 hereof”.

[17] Clause 9.1 provided that the founder should, with the consent in writing of the trustees, have power to alter or add to the provisions of the deed. Certain amendments were prohibited, however; the most significant prohibition (cl.9.2.5) was on altering the definition of excluded persons or any of the provisions of Sched.2. Clause 10 of the deed imposed what were described as “irrevocable limitations” on the trustees’ powers. Clause 10.1 provided that: “Notwithstanding anything to the contrary express or implied in this Deed, no power or discretion hereby or by law conferred on the Trustees shall be exercisable nor exercised by the Trustees in such manner as to cause any part of the Trust Fund or the income thereof to be used to provide a Prohibited Benefit or to become payable to or applicable for the benefit of the Founder”.

“Prohibited benefits” were defined by cl.1.1.5 as, in general terms, pension benefits falling within s.612(1) of the Income and Corporation Taxes Act 1988 and “any sum or benefit which, were it to be received by a Beneficiary, would constitute for the purposes of income tax an emolument of any person formerly employed by or holding office with the Founder”. Finally, the Principal Trust was made subject to English law.

[18] In May 2001 the respondents other than MGML executed deeds of adherence to the Principal Trust. Under these, MGML as founder agreed that the adhering company should be permitted to adhere to the Principal Trust, so that their present and future employees should become “beneficiaries” of that trust. On 28 January 2002 MGML and the then trustee entered into a deed of variation of the principal trust. Under cl.1.1.9 of that deed Sir David Murray was made the protector of the trust. Clause 9.1 provided that “the Protector shall with the consent in writing of the Trustees have the power at any time by deed to alter or add to all or any of the provisions of this Deed in any respect and such power shall be absolute and shall not be a fiduciary power”. That power could not, however, be used to alter the provisions of Sched.2 defining excluded persons. It should be noted that employers other than MGML were not parties to the deed of variation, and are thus not bound by it. On 29 November 2002 the provisions of the Principal Trust were varied by a deed of amendment in such a way as to exclude certain employees from the class of beneficiaries. For HMRC it was contended that that deed was void and of no effect because it purported to have retrospective effect; this is a matter that might have been relevant to PAYE and liability. Nevertheless, for reasons discussed subsequently in relation to PAYE, we do not find it necessary to consider this argument.

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Terms of the trust deeds: sub-trusts

[19] A substantial number of sub-trusts were set up, and we were referred to three specific examples. The first related to A, who occupied a senior executive position within the group, the second to B, who was a footballer employed by the fifth respondents, and the third to C, who was also a footballer employed by the fifth respondents.

[20] In relation to A, the sub-trust was established by a declaration of trust dated 17 September 2001. It was known as the Murray Group Management Ltd Eighth Sub-Trust. That deed was granted by Insinger de Beaufort Trust Company Ltd, of St Helier, Jersey, defined as “the Original Trustee”.

The interpretation clause defined “the Trust Period” as a period of 80 years from the date of the deed establishing the Principal Trust, “the Principal Beneficiaries” as the named wife and children of A who should be living at his death, with the proviso that no excluded person should be a principal beneficiary, and “the Protector” was defined as A himself. The declaration of trust, in cl.2.1, was as follows: “… the Trustee shall during the Trust Period hold the Trust Fund and the income thereof UPON TRUST for all or any one or more exclusively of the others or other of the Principal Beneficiaries in such shares and in such manner and under such trusts and subject to such powers and provisions as the Trustee shall in its absolute discretion during the Trust Period by any deed or deeds revocable or irrevocable appoint, as the Trustee shall in its absolute discretion think fit, PROVIDED THAT the Trustee may if in its absolute discretion (it should) think fit accumulate the whole or any part of the income of the Trust Fund by investing the same and the resulting income thereof in any investments hereby authorised and adding the accumulations to the capital of the Trust Fund.”

The trust itself was not revocable, but it was provided (in cl.2.2) that the trustee might, with the consent of the protector, declare that the class of principal beneficiaries had ceased to have any members, whereupon the trust fund would revert to the Principal Trust. Clause 9 contained a power of amendment; it provided that, subject to certain other provisions found in cls 9 and 10, “the protector shall have the fiduciary power at any time by deed to alter or add to all or any of the provisions hereof in any respect PROVIDED THAT the foregoing power shall not without the consent in writing of the Trustee be exercisable in any manner which would adversely affect the Trustee”. Clause 9.2 prohibited use of that power to alter cl.2.

[21] Following execution of the foregoing declaration of trust, on 12 September 2001 A in his capacity as protector wrote to the trustee of the sub-trust to express his wishes as to the manner in which the trustee might exercise its discretionary powers under the Trust. He wrote: “My wishes are that: 1. during my life the accumulated income and other capital of the Trust be held and applied according to my wishes; 2. upon my death that such remaining accumulated income and capital be held for the benefit of my wife, [D] and children, [E and F] in equal shares; 3. upon the death of my said children, accumulated income and capital be held in like manner for such of their children…, then or later alive, if more than one, in equal shares per stirpes.”

On the same date A wrote to the trustee of the sub-trust to ask whether it would give consideration to advancing a loan to himself for £15,000 upon

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commercial terms. The letter stated “Naturally I will abide by the trustee’s decision on this matter.”

[22] In relation to B, the sub-trust was established by a declaration of trust dated November 2004. It was known as the Murray Group Management Ltd Sixty Ninth Sub-Trust. That deed was granted by Equity Trust (Jersey) Ltd, which had formerly been Insinger de Beaufort Trust Company Ltd. So far as material, the terms of the declaration of trust were the same as those for A. In this case the fifth respondent wrote to B on 17 June 2004 to confirm that its board would recommend to the trustees of the Principal Trust to include him as the protector of a sub-trust and to fund that sub-trust with such amounts as give a beneficial interest, free of UK or other taxation, on specified dates in 2004 and 2005. In the event that the trustees did not include B as protector of such a sub-trust on before 31 December 2004, the fifth respondent undertook to pay him on demand, free of UK or other taxes, £37,000. The same result was to follow if the trustees would not fund a sub-trust in the manner specified.

That letter appears to us to indicate that the sums paid to the Principal Trust and to the sub-trusts represented remuneration for employment.

[23] In relation to C, the sub-trust was established by a declaration of trust dated 31 October 2001. It was known as the Murray Group Management Ltd Thirteenth Sub-Trust. That deed was granted by Insinger de Beaufort Trust Company Ltd, of St Helier, Jersey, defined as “the Original Trustee”. So far as material, its terms were the same as those for A. In this case, discussions had taken place with an agent acting for the footballer. We were referred to the documents in which the footballer’s remuneration had been agreed between the fifth respondent and the agent in July 2001. In the schedule containing details of the remuneration, it was stated: “2. Annual Salary £8,000 per week. Contribution to remuneration trust £8,000 per week namely £416,000 per annum which equates to the sum of £250,000 per annum net.”

It is apparent from the totality of the documentation that the “remuneration trust” was the Principal Trust as above defined. That demonstrates that the payment to the Principal Trust was part of the total remuneration package.

[24] On 13 July 2001 the fifth respondent wrote to C to state that its board would recommend to the trustees of the Principal Trust to include him as the protector of a sub-trust and to fund that sub-trust with £125,000 net in October 2001, February and October in each of 2002 to 2004 and in February 2005. On 15 October 2001 the fifth respondent sent C what was described as “the relevant paperwork needing to be completed prior to the payment you are due at the end of October”. Thereafter the footballer sent a letter of wishes in similar terms to that set out in para.21 above. Once again, there is an obvious connection between the amounts paid to the Principal Trust and subtrusts and the footballer’s remuneration package.

Summary of financial arrangements

G

5304.indd 496

[25] Thus in summary the employers of the various executives and footballers paid sums to the trustees of the Principal Trust. Each such payment was related to a particular employee. The Trustee of the Principal Trust had a discretion as to what to do with the funds, but received a letter of wishes from the employee in question, and in practice effect was invariably given to that letter of wishes.

The letters of wishes requested that a sub-trust be set up and nominated members of the employee’s family as beneficiaries of the sub-trust. At the same

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time it requested that the employee himself be made the protector of the subtrust. Thereafter funds were transferred to the trustees of the sub-trust, who held them for the purposes of the trust, namely on a discretionary trust to benefit members of the employee’s family. In some trusts there was initially a direction to accumulate during the employee’s lifetime, but those accumulations would accrue for the benefit of the family members who became entitled on his death. The employee then normally requested a loan from the trustees of the sub-trust, and in practice this was invariably granted. The First-tier Tribunal found that the discretions exercised by the trustees were genuine, and that the loan was a genuine loan, repayable by the employee-debtor.

[26] Nevertheless, the funds originated in the relationship between a particular employee and his employer. After the arrangements were given effect the result was that the trustees of the sub-trust held the funds for the benefit of beneficiaries who comprised members of the employee’s family.

That was an ordinary trust, and for tax purposes it would be subject to the ordinary tax regime that applies to trusts. After the loan had been granted, the employee was the debtor in the loan and the trustees were the creditor. That loan became, obviously, the principal asset of the sub-trust. It remained trust property, however, and it was accordingly held for the specified trust purposes.

The existence of the loan could have no bearing on the employee’s income tax liabilities, although the debt would be deductible from his estate on his death for inheritance tax purposes; this matter was generally pointed out to the employees. To the extent that the trustees earned income they would be subject to income tax, but that was their tax liability, not the employee’s. If the sub-trust were wound up for any reason, the beneficiaries, members of the employee’s family, would be entitled to payment of the capital. That might give rise to liability to capital gains tax or inheritance tax, but it would not be relevant to income tax. Certain of the arguments presented to us were based on the premise that if the payments made to the Principal Trust or the trustees of the sub-trusts were liable to income tax as the earnings or emoluments of the employee in question, that could give rise to double tax liability. That suggestion does not appear to us to be well founded. Even if the payments made by employers to the Principal Trust are subject to income tax as emoluments or earnings, subsequent payments would be neither emoluments nor earnings, and therefore would not be subject to income tax.

A

B

C

D

E

First-tier Tribunal’s conclusions

[27] On the basis of their findings in fact the majority of the First-tier Tribunal discussed the Ramsay principle (Ramsay (W T) Ltd v IRC), and concluded that they had to regard the trust structure and loans as genuine legal events with real legal effects (para.223). They held that the employees benefiting from the trust and loan arrangements “did not obtain an absolute legal entitlement to the monies”. An employee’s entitlement, or expectation, was to no more than a loan. Furthermore, this was not affected by the position of the employee as protector of his sub-trust. It was accepted that there was a degree of orchestration in the arrangements made with employees, but the majority of the tribunal held that these fell short of enabling an absolute transfer of funds to the employee. On that finding, we note that it was not argued before the tribunal, and it has not been argued before the court, that any such absolute transfer of funds took place. The existence of an absolute transfer of funds to the employee is not in our opinion essential for a payment to amount to an emolument; we return to this matter at para.56 below.

[28] The majority of the First-tier Tribunal concluded:

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“231. The trust/loan scheme is essentially straightforward. It does not include a complicated sequence of stages. The extent of the employer’s obligation is to make a payment into trust. The trust structure and loans bear to be of legal effect. Loans were discretionary although in fact they were (almost) invariably granted. But that was the extent of the employee’s benefit. Whether the arrangement is viewed commercially or legalistically, the inexorable conclusion, in our view, is that the payments into trust became a loan and no more. They were not paid over absolutely and so do not become earnings or emoluments. We do not regard the liability to make repayment as a remote contingency which might in the context of a purposive construction fault to be disregarded as too remote for practical purposes … .

232. Our findings of fact are as set out (in previous paragraphs) and…we have identified a factual matrix upon which we have proceeded. We are unable to make further findings in fact in support of there being an orchestrated scheme extending to the payment in effect of wages or salary absolutely and unreservedly to the employees involved, as (counsel for HMRC) urged us to do.”

On the foregoing basis the tribunal held that the sums advanced to employees by way of loan were made in pursuance of discretionary powers and remained recoverable and represented debts on their estates. The sums advanced by the appellant companies into the Principal Trust, whether to that trust or on payment to a sub-trust, or thereafter on being advanced by way of loan to an employee, “were not at any time held absolutely or unreservedly for or to the order of the individual employee”.

[29] In relation to the foregoing approach, we make certain observations at this stage. First, the fact that the payments were ultimately made to employees by way of loan does not appear to us to be relevant to the tax treatment of the payments made by employers. The critical question is whether the payments made by the employing companies were part of the consideration for employees’ services; if they were, they are emoluments or earnings, and are taxable. The fact that absolute payments were not made to employees is not in our opinion relevant to this issue. We return to these matters subsequently.

[30] Dr Heidi Poon, the third member of the First-tier Tribunal, dissented from the opinion of the majority. For present purposes it is sufficient to record that she examined the Ramsay principle at length, and concluded that, on a proper analysis of the transactions effected by the taxpayers, payments had been made to employees via the trust. Furthermore, those trust payments could be characterised as having placed funds unreservedly at the disposal of the employees. In so holding she had regard to the essential nature of the transaction, and applied the legislation in a practical and commercial manner.

On that basis she considered that the trust payments must be considered as “emoluments” for the purposes of the tax legislation. For reasons discussed subsequently, we are in agreement with Dr Poon’s conclusion. Nevertheless, as we have already noted, her detailed reasoning proceeds on a number of findings of fact that differ from or supplement the facts found by the majority.

For present purposes we are constrained by the facts found by the First-tier Tribunal, and that obviously means the findings in fact of the majority. For that reason we are unable to adopt the whole of Dr Poon’s reasoning.

Decision of the Upper Tribunal

G

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[31] The appeal to the Upper Tribunal was dismissed. The First-tier Tribunal had not accepted the conclusions advanced by HMRC. They had identified the applicable law and applied a purposive construction to the relevant statutory

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provisions. They had endeavoured to take a realistic view of the facts. The end result was therefore that the employees received loans, not earnings. There was accordingly neither payment of earnings nor the equivalent of payment in the form of monies being at the unreserved disposal of the employee; the employees could not without the intervention and cooperation of beneficiaries obtain absolute entitlement to the monies. The loans were recoverable, and recovery was not a remote contingency that could be ignored. Ultimately, despite the element of orchestration involved, the arrangements did not result in the employees having power to obtain anything greater than a loan. It was held that that was a conclusion which was open to the First-tier Tribunal. Thus the challenge based on a Ramsay line of argument must fail.

[32] Two further arguments presented by HMRC were also rejected: an argument that there was an underlying tacit agreement between employer and employee to pay earnings and an argument that there was a directed payment of earnings. These were rejected, the former on the basis that the First-tier Tribunal’s findings in fact were inconsistent with any underlying tacit agreement to pay earnings, and the latter on the ground that at the time when employees choose to enter into the arrangements they did not have any present entitlement to payment. We note that the latter argument is not the same as the redirection of earnings argument presented to us on behalf of HMRC.

A

B

C

Relevant legislation

[33] During the tax years from 2001/02 to 2008/09 the incidence of income tax on employment income was governed by two separate regimes. First, during the years 2001/02 and 2002/03 the relevant legislation was contained in the Income and Corporation Taxes Act 1988 as amended. Under that legislation, the charge to income tax under a series of schedules was imposed by s.1. The payment of emoluments was subjected to income tax under Sched.E by s.19 of the Act. That section imposed a charge on emoluments derived from any office or employment where the person holding the employment was resident and ordinarily resident in the UK. “Emoluments” were defined in s.131(1) as including “all salaries, fees, wages, perquisites and profits whatsoever”.

Section 202A provided that income tax under Sched.E should be charged on the full amount of the emoluments received in any year of assessment in respect of the office or employment concerned. Section 202B defines when emoluments are to be treated as received for these purposes; subject to certain specialties in relation to companies which are not relevant for present purposes, the relevant date is the time when payment is made of or on account of the emoluments or the time when a person becomes entitled to payment of or on account of the emoluments.

[34] Secondly, during the tax years from 2003/04 to 2008/09 the legislation governing income tax on employment income was replaced by the Income Tax (Earnings and Pensions) Act 2003. Section 6 of that Act imposes a charge to tax on “employment income”, which is defined by s.7 as including “earnings” as defined by s.62 (Ch.1 of Pt.3). The material parts of the latter definition are as follows:[His Lordship quoted the section as set out above and continued:] Thus the central concept of the tax regime governing employment income is the payment of emoluments or earnings.

[35] Under both regimes an employer making payment of income assessed to tax is obliged to deduct income tax in accordance with the PAYE regulations.

Under the pre–2003 regime provision to that effect is made in s.203 of the Taxes Act 1988, which provides that on the making of any payment of or on account of any income assessable to income tax under Sched.E income tax

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shall be deducted in accordance with the applicable regulations. Under s.203A, payments of income are to be treated as made, subject to specialties relating to companies, on the earlier of the time when the payment is made or the time when a person becomes entitled to payment. Under the later regime equivalent provision is made in reg.21(1) of the PAYE Regulations 2003, which provides that, on making a relevant payment to an employee during the tax year, an employer must deduct tax in accordance with the regulations.

Under both regimes, therefore, an employer who makes a payment of earnings or emoluments to or on account of an employee is obliged to deduct tax in accordance with the PAYE Regulations. Other legislative provisions apply in the event that the payment is not made by the employer but through an intermediary; these are discussed subsequently in the context of the PAYE. Parties’ arguments on appeal

C

D

E

F

G

5304.indd 500

[36] HMRC have appealed against the decision of the Upper Tribunal on two grounds. First, it is contended that the payment of monies by the relevant employer to the Principal Trust, or alternatively the appointment of monies by the Principal Trust to a sub-trust set up for the benefit of an employee, constituted a payment of taxable earnings, taxable in the hands of the employees whose services were so rewarded. On this basis, it is said that the scheme amounted to a mere redirection of earnings which did not remove the employee’s liability to income tax. Of the two alternatives, it is submitted that the first should be preferred: the payment of monies by the relevant employer to the trustees of the Principal Trust triggered liability to tax. Secondly, HMRC contend that when monies were appointed by the trustee of the Principal Trust to the relevant sub-trust, that appointment was made in such a way that those monies were at the unreserved disposal of the employee, who was appointed protector of the sub-trust, and hence constituted a payment of taxable earnings, taxable in the hands of the employee. In advancing that contention, they relied on the Ramsay principle (Ramsay (W T) Ltd v IRC) as explained in Garforth v Newsmith Stainless Ltd and Aberdeen Asset Management plc v HM Revenue and Customs. The argument as presented to the court was that each of the employees was appointed protector of the sub-trust set up for the benefit of his family.

Powers were conferred on the protectors under the deeds constituting the subtrusts, including a power to alter the trust purposes. That power could be used in such a way that the only beneficiary was the employee. In that way the funds were at the employee’s unreserved disposal.

[37] For the respondents it was contended that no error had been demonstrated in the reasoning of the First-tier and Upper Tribunals. Those were specialist tribunals and the court should be slow to interfere with the decisions. In this case it should not do so. Furthermore, the first argument for HMRC, based on the proposition that the payments made into the trusts and as loans were mere redirected payments of emoluments or earnings, had not been put to the tribunals, and should not be entertained at this stage. In relation to that argument, it was contended that the redirected payment principle had no application because there had been no payment of money or money’s worth to any employee. The only benefit that they had obtained was through loans made to them, but those were repayable and as such were not taxable.The First-tier Tribunal had specifically held that the trust arrangements and the loans were genuine; consequently they could not be disregarded.

Particular reliance was placed on the recent decision, relating to National Insurance Contributions, in Forde & McHugh Ltd v Revenue and Customs Commissioners. In relation to HMRC’s second argument, it was submitted that

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the office of protector in all of the sub-trusts was fiduciary in nature.

Consequently the protector could not use the powers for his own benefit. That meant that the funds in the sub-trusts were not at his absolute disposal, and HMRC’s second argument must therefore fail.

A

Preliminary issues

[38] Before we consider the merits of the appeal, we must consider three preliminary matters which have an important bearing on the present appeal.

The first of these is whether it is competent for the court to consider a ground of appeal that was not argued before either the First-tier Tribunal or the Upper Tribunal. This is directly relevant to the first ground of appeal for HMRC, which ex concessu was not argued before the First-tier or Upper Tribunals.

The second issue relates to the powers of an appellate court on a statutory appeal under ss.13 and 14 of the Tribunals, Courts and Enforcement Act 2007: such an appeal is competent “on any point of law” (s.13(1)), and the critical question is what that expression encompasses. The third question is the extent to which, in an appeal under ss.13 and 14, the Court of Session should deal with questions of English law: whether it may take judicial notice of English law or whether, as in ordinary private law proceedings, English law must be treated as a question of fact, with the result that the findings of the First-tier and Upper Tribunals would be binding. We consider these issues in turn.

B

C

New grounds of appeal

[39] We are of opinion that in a statutory appeal of this nature it is competent for the court to entertain a ground of appeal that has not been argued in the First-tier or Upper Tribunals, although it should be slow to do so in any case where additional findings of fact are required, and should not do so if unfairness results. The law on this matter is in our opinion correctly stated by Sedley LJ in Miskovic v Secretary of State or Work in Pensions where, at para.124, he referred to a number of earlier cases and continued: “None of these cases sets out a golden rule for the admission of new issues on appeal, but all proceed on the assumption that there is no jurisdictional bar to their being entertained in proper cases. It is an assumption which in my judgment can be made good on a simple constitutional basis. The Court of Appeal exists, like every court, to do justice according to law. If justice both requires a new point of law to be entertained and permits this to be done without unfairness, the court can and should entertain it unless forbidden to do so by statute.”

We are in full agreement with that statement of the law, and for this reason we consider that we should entertain HMRC’s first ground of appeal, even though it was not argued directly before the tribunals. We are satisfied that it requires no new findings of fact; it proceeds on the First-tier Tribunal’s findings of fact and the accompanying documents. Indeed aspects of the ground appear to have been canvassed to some extent before the First-tier and Upper Tribunals.

We do not think that allowing this ground gives rise to any unfairness to the respondents; detailed notice of it was given in the grounds of appeal and the notes of argument, and counsel for the respondent was able to present a full argument in response. Nevertheless, we recognise that the introduction of a new ground of appeal may have consequences in expenses, and for that reason we make no finding at this stage about the expenses of these proceedings.

[40] In relation to appeals from statutory tribunals, one further specialty applies. In such cases leave to appeal to the court is required, either from the

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Upper Tribunal or from the court itself. In cases where application is made to the Court of Session, the matter is governed by Rule of Court 41.57. That rule applies to the new primary ground advanced by HMRC, which was not advanced before the Upper Tribunal. In accordance with that rule, leave to appeal will only be given in a case that raises an important point of principle or practice or where there is some other compelling reason for the court to hear an appeal. In our opinion such leave should be granted on the basis that the argument raises an important point of principle and practice. We consider that the redirection of earnings principle is one of wide potential application, and the circumstances in which it may apply in particular cases require to be determined; none of the primary authorities relied on is directly in point in the present case. The underlying principle is in our view of importance in itself, and its impact on tax practice is clearly also important. We should add that we were informed by counsel for HMRC that the issue of redirection of earnings was of importance to the national revenue. Counsel for the respondents countered by pointing out that provisions of the Income Tax (Earnings and Pensions) Act 2003, notably s.201 and Pt.7A, introduced in 2011, had been enacted to deal with cases such as the present; thus, for the future at least, any threat to the national revenue had been avoided. Notwithstanding the enactment of Pt.7A, it appears to us that the matter is of obvious importance.

Powers of an appellate court on a statutory appeal

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[41] This appeal proceeds under s.13 of the Tribunals, Courts and Enforcement Act 2007. Under that Act the first instance tribunal for all appeals against assessments to tax is the Tax and Chancery Chamber of the First-tier Tribunal.

Section 11(1) of the Act confers a right of appeal from the First-tier Tribunal to the Upper Tribunal “on any point of law arising from a decision made by the First-tier Tribunal”, with exceptions that do not apply in the present case.

If the Upper Tribunal finds that the First-tier Tribunal has made an error on a point of law, it is empowered by s.12 to set aside the decision and to remit it to the First-tier Tribunal with directions for its reconsideration, or to re-make the decision. From the Upper Tribunal an appeal lies to the Court of Session under s.13 of the Act. This right of appeal is “on any point of law arising from a decision made by the Upper Tribunal”, once again with exceptions that are not relevant to this case. The right of appeal is thus on a point of law, and does not extend to the facts, where the findings of the First-tier Tribunal are generally binding.

[42] Although the concept of appeal on a point of law might seem simple, it has given rise to considerable controversy; indeed in the well-known case of Edwards v Bairstow, an appeal was taken to the House of Lords to adjudicate upon differences of approach that had developed between the Scottish and English courts. We are of opinion that an appeal on a point of law covers four different categories of case. The first of these categories is appeals on the general law: the content of its rules. In tax appeals these are largely statutory, but the interpretation of a particular statutory provision may be a matter of general law, and tax law also includes a number of general non-statutory rules, such as the redirection principle and the Ramsay principle, both of which are relevant to this case. The second category comprises appeals on the application of the law to the facts as found by the First-tier Tribunal. This is in our opinion a clear example of an appeal on a point of law: it is the application of the general rules to particular factual situations that defines the frontiers of a legal rule and thus its practical scope. Furthermore, it is the application of the general rules to particular facts that brings about the development of those

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rules to meet new situations. For these reasons we consider that an appeal on the application of the general law to a particular factual situation must be regarded as being on a point of law. This is illustrated by the facts of Edwards v Bairstow. There the House of Lords, reversing the decisions of the General Commissioners and lower courts, held that a transaction involving the acquisition of spinning plant, dividing it into lots and selling those lots at a profit was an adventure in the nature of trade. In holding otherwise, the Commissioners and the lower courts had misdirected themselves as to the meaning and proper application of the expression “adventure…in the nature of trade” found in the relevant taxing statute, the Income Tax Act 1918: see Lord Radcliffe at pp.36–37.

[43] The third category of appeal on a point of law is where the Tribunal has made a finding “for which there is no evidence or which is inconsistent with the evidence and contradictory of it”: Inland Revenue Commissioners v Fraser at pp.497–498, per LP Normand. This runs into a fourth category, comprising cases where the First-tier Tribunal has made a fundamental error in its approach to the case: for example, by asking the wrong question, or by taking account of manifestly irrelevant considerations, or by arriving at a decision that no reasonable tax tribunal could properly reach. In such cases we conceive that the Court of Session and the Upper Tribunal have power to interfere with the decision of the First-tier Tribunal as disclosing an error on a point of law: Edwards v Bairstow, per Lord Radcliffe at p.36.

[44] In practice the main difficulties that arise in determining whether an appeal raises a point of law occur when legal rules are applied to particular factual situations. The First-tier Tribunal makes findings of primary fact, and may draw inferences of fact from these, such as that goods acquired by the taxpayer are intended to be sold at a profit. Findings of that nature are not susceptible to review unless they fall within the third and fourth categories discussed above, where there is a lack of evidence for an inference of fact or a breakdown in proper intellectual processes. The next question, however, is whether a statutory charge to tax applies to the facts so found, and that is a point of law. Thus deciding whether an intended sale at a profit is an adventure in the nature of trade involves the application of legal rules and thus raises a point of law. No doubt cases exist where the inferences drawn are complex, involving both law and fact, and in that event the court must attempt to distinguish the two categories. Borderline cases will obviously exist, but the distinction is still important.

[45] Decisions of the First-tier Tax Tribunal frequently involve elements of evaluation and judgment. In general, a court, or the Upper Tribunal, should be slow to interfere with the decision of the First-tier Tribunal in cases of this nature. This is explained by the Court of Appeal in Procter & Gamble UK v Revenue and Customs Commissioners, a case on VAT. Food is generally zero rated for VAT purposes, but there is an exception for “potato crisps…and similar products made from the potato, or from potato flour, or from potato starch…”. The question that arose was whether a savoury snack product known as “Regular Pringles”, with a potato flour content of approximately 40 per cent, was subject to that exception. The Value Added Tax and Duties Tribunal, the predecessor of the First-tier Tribunal, held that it was, and this was upheld on appeal. Toulson LJ, at paras 47–49, stated that the question of whether Regular Pringles should be classified as falling within the exception required a combination of fact finding and evaluative judgment; in particular the question of similarity to potato crisps and other potato products required an evaluative judgment. Parliament had created a specialist tribunal to

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determine these matters, and in reviewing the decision of such a tribunal he thought it right to bear in mind remarks by Baroness Hale in A H (Sudan) v Secretary of State for the Home Department. She referred to the fact that the Immigration Tribunal was “an expert tribunal charged with administering a complex area of law in challenging circumstances”; consequently the ordinary courts should approach appeals from them with appropriate caution, because it is probable that the tribunal will have reached the right decision. Similar remarks were made by Jacob LJ in Procter & Gamble at paras 9–15, in which he cited a range of statements in earlier cases regarding the need for appellate caution in reversing a judge’s evaluation of the facts.

[46] We agree with the general proposition advanced by Toulson LJ. Nevertheless, it appears to us that evaluative decisions cover a wide spectrum.

At one end is the sort of decision that is typically made by an immigration tribunal: it has a high factual content, frequently dependent on detailed information about the country from which the would-be immigrant has come.

The same can be said of the question in Procter & Gamble: it was in essence whether Regular Pringles were a potato product in the same category as potato crisps. That is an evaluative exercise in which the factual component is clearly dominant. Yet another example would be where a First-tier Tax Tribunal one of whose members was, as here, a chartered accountant reaches a conclusion on the application of accounting principles. It is common sense that in such a case an appellate court should be very slow to interfere, unless the case falls into the third or fourth of the categories discussed above where the First-tier Tribunal has misunderstood the evidence or proceeded without evidence or has made a fundamental error in its method of reasoning.

[47] In some tax appeals, however, the evaluative exercise contains a much smaller factual component; an example would be a case such as the present where the transaction that must be evaluated involves legal institutions such as trusts or contracts or assignations. In a case of that nature it is much easier for an appellate court to interfere; the legal element is identifiable, and clearly raises a point of law. In an extreme case, for example if the First-tier Tribunal misconstrued the rights of the parties under a trust, that would be a straightforward error of law. In a slightly less extreme case, where the tribunal had assessed the overall effect of a series of transactions, there is a greater element of evaluation, but we still consider that in such a case the courts might properly interfere if they considered that the transaction or the legal concepts involved in it had been misconstrued. It is a matter of degree: the higher the factual component in the evaluative exercise, the slower the court should be to interfere, but correspondingly if the factual component is relatively low and the legal component is high the court may properly interfere. As we have indicated, we consider that the present case falls into the latter category.

[48] Furthermore, the issues in the present case are, first, the scope of the redirection of earnings principle and its application to the particular facts of the case, and secondly, the application of the Ramsay principle by reference to the powers of a protector of a trust: in particular, the question is whether a protector can exercise those powers to secure a benefit for himself. In our opinion these issues raise clear questions of law. To the extent that legal principles have been misapplied, the court can and must interfere with the decision of the First-tier Tribunal.

Treatment of English law

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[49] The third preliminary issue is the manner in which the Inner House should deal with questions of English law in hearing an appeal from the Upper

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Tribunal under the Tribunals, Courts and Enforcement Act 2007. Normally English law, like any legal system other than Scots law and other systems such as the law of the European Union that have been incorporated into Scots law, is treated as foreign law, which is a question of fact and must be established by evidence. In the absence of evidence or agreement between the parties, it will be presumed that foreign law is the same as Scots law. In the present case, however, proceedings were initiated in the First-tier Tribunal and the first appeal was heard in the Upper Tribunal. Both of those tribunals have UK-wide jurisdiction, and it is agreed between the parties that both of them have judicial knowledge of English law. In the event of an appeal from the Inner House to the UK Supreme Court, that court too has judicial knowledge of English law.

The critical question is whether in that structure of tribunals and courts the Court of Session has judicial knowledge of English law.

[50] In our opinion it has such judicial knowledge. The result otherwise would be highly artificial. The lower tribunals would have judicial knowledge of English law; the court to which a final appeal may be taken would have judicial knowledge of English law; but this court would be constrained by the findings on English law of the First-tier and Upper Tribunals. We cannot believe that that was the intention when the structure of appeals in ss.11–14 of the 2007 Act was set up. We do not think that this will give rise to any practical difficulties.

The basic legal concepts of Scots and English law, in this case the trust, the contract and the loan, are broadly similar. No doubt the theoretical nature of a trust is different, being based on the notion of legal estate and equitable interest in England, whereas in Scotland it is based on the notion of dual patrimonies of the trustee. Nevertheless the practical results are similar, and the institution of the trust fulfils similar functions in both jurisdictions. Consequently Scottish judges should not have any great difficulty in understanding English law, and are expected to do so in the Upper Tribunal and UK Supreme Court. Moreover, it can be expected that the parties will present careful and informed submissions on English law, as occurred in the present case, and the Court of Session will obviously check submissions against the cases and textbooks that are referred to. Finally, we note that in Inland Revenue Commissioners v City of Glasgow Police Athletic Association, it was held that the Court of Session could take judicial notice of the English law of charity where that became relevant to liability for income tax, in accordance with the earlier decision in Special Commissioners of Income Tax v Pemsel. Although that decision is not directly in point, because the result of the decision in Pemsel’s case was that for revenue purposes the English law of charity became part of Scots law, it points to the fact that there is no objection in principle to the Scottish courts’ taking judicial notice of English law.

[51] We now turn to the two arguments presented in the appeal.

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The first issue: whether there was a redirection of earnings

[52] The first submission made by HMRC was that the scheme involving payments to the various trusts and the application of the monies so paid amounted to a mere redirection of earnings which did not remove the liability of employees to income tax. In our opinion this submission is correct, and accordingly the appeal must be allowed on this ground.

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The relevant legal principle

[53] Schedule E income tax was a tax on the emoluments of any office or employment, and since 2003 the charge to income tax under s.6 of the Income Tax (Earnings and Pensions) Act 2003 is a tax on earnings from employment,

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as defined by s.62 of that Act. The definition of earnings in s.62 is wide; it comprises any salary, wages or fee, and also any gratuity or incidental benefit if it is money or money’s worth, or anything else that constitutes an emolument.

The critical feature of an emolument and of earnings as so defined is that it represents the product of the employee’s work—his personal exertion in the course of his employment. This point was made by the Privy Council in Hadlee v of Inland Revenue Commissioners. In that case the taxpayer, a partner in a firm of accountants, had executed a trust deed to benefit his wife and child, and by deed of assignment transferred a percentage of his share in the partnership to the trust. The result was that the trust became entitled to monies from the partnership. Those were assessed to income tax, and it was held that the assessment was properly made. Lord Jauncey, delivering the opinion of the Privy Council, stated (at p.533D–E) that the income which accrued to the assignee flowed not from a capital asset which was capable of assignment but from the performance by the taxpayer of such obligations as he was required to perform under the partnership contract. On that basis, it was held (at p.533F–G) that the applicable principle was one that had been stated by Richardson J in the New Zealand Court of Appeal: “There is no justification in principle for differentiating between salary and wage earners and professionals whose income is the product of their personal exertion. In either case the person whose personal exertion earns the income derives the income.”

Thus income derived from the personal exertions of the taxpayer is his income for tax purposes, even if it is paid to a third party. That principle must in our opinion apply to the concepts of emoluments and earnings for the purposes of income tax on employment income in the UK. [54] A similar approach is found in Brumby v Milner, a case involving a profit-sharing scheme where a company lent money to trustees to purchase shares in the company. The primary trust purpose was to use the shares so acquired to provide income for division among employees. On termination of the scheme any balance was to be distributed among employees and former employees in such proportions as the trustees might determine. When the scheme was wound up, the amounts paid to employees were assessed to income tax under Sched.E. It was held that the assessments were properly made. Lord Russell, delivering the opinion of the Court of Appeal, agreed with the contention for the Crown that: “From its very birth the scheme was plainly intended as an incentive scheme both to encourage and to reward employees in respect of their services as such; payments made during the years before the scheme was terminated were therefore plainly profits from the employment as being rewards for and referable to services” (at p.35H).

The terminal payments were equally subject to tax. They could not be regarded as a throw-away provision bearing no colour of a reward for services; the existence of a discretion in the trustees to allocate funds was against such an inference. Consequently “the scheme was one scheme based fundamentally on reward for services by employees, and the fact that after the final payment there was no more by way of bonus to look for does not relevantly distinguish that final payment” (at p.36F). The House of Lords agreed with Lord Russell.

Lord Wilberforce stated (at p.1098H): “The only question in this, and in the many similar cases which come before the courts relating to such payments as cricketers’ or footballers’

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benefits or for Easter offerings, or housing subsidies, is whether the emolument can be said to arise ‘from’ the employment or office.”

The answer in that case was plain. A similar approach was taken (at p.1100E)

by Lord Simon of Glaisdale, who suggested the question: “if the payment to the appellant was not made to him in respect of his personal situation as an employee, in what respect was it paid to him?” The manner in which the scheme was analysed by both the Court of Appeal and the House of Lords is significant; it is clear that both courts adopted an approach based on a realistic appraisal of the true nature of the transaction. That can be said to prefigure the development of the Ramsay principle in cases such as Barclays Mercantile Business Finance Ltd v Mawson. In our opinion a similar approach must be taken in the present case.

[55] We were also referred to the first instance decision in Smyth v Stretton, which involved a scheme established by the governors of Dulwich College for the benefit of assistant masters. Annual payments were made into the scheme on behalf of each master, but no benefit could be taken until the master either left the employment of the school or died. It was held that the payments made into the scheme were nevertheless assessable to Sched.E income tax. Channell J noted two general principles that are relevant to the present case. First (at p.42) he stated: “a sum receivable by way of salary or wages is not the less salary or wages taxable because for some reason or another the person who receives it has not got the full right to apply it just as he likes”. Then (at p.43) he discussed a case where a man has a salary from his office and, by agreement with someone else, has bound himself to set apart a certain portion of that salary year by year and save it and invest it for the benefit of his wife and children. Such a case was quite clear; the payment was still income, notwithstanding that the employee had contracted with someone else to apply it in a particular way. That appears indistinguishable from the present case.

[56] The fundamental principle that emerges from these cases appears to us to be clear: if income is derived from an employee’s services qua employee, it is an emolument or earnings, and is thus assessable to income tax, even if the employee requests or agrees that it be redirected to a third party. That accords with common sense. If the law were otherwise, an employee could readily avoid tax by redirecting income to members of his family to meet outgoings that he would normally pay: for example to a trust for his wife, as in Hadlee, or to trustees to pay for his children’s education or the outgoings on the family home. It follows that, if the principle applies, it is irrelevant that the redirection is through the medium of trust arrangements. It is equally irrelevant that the trustees who receive the payment, at whatever remove, exercise a genuine discretion as to what happens to the funds. The funds are ultimately derived as consideration for the employee’s services, and on that basis they are properly to be considered emoluments or earnings. Indeed, in Brumby v Milner, the existence of a discretion in the trustees as to the benefits taken by employees was taken as a factor pointing towards the conclusion that the payments were derived from employment.

[57] This principle is ultimately simple and straightforward—indeed, so straightforward that in cases where elaborate trust or analogous relationships are set up it can easily be overlooked. That, it seems to us, is what happened before the First-tier and Upper Tribunals in this case [58] In applying this principle to the facts of a particular case, one further general legal principle is of importance. In assessing the liability of a transaction to taxation, it is imperative in every case to determine the true nature of the

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transaction, viewed realistically: Barclays Mercantile Business Finance Ltd v Mawson, at paras 32 and 35, quoting Collector of Stamp Revenue v Arrowtown Assets Ltd at para.35, and followed in Aberdeen Asset Management plc v HMRC at para.25; this is the principle that is prefigured to some extent in Brumby v Milner. In the present case, therefore, it is essential to have regard to the true nature of the individual transactions involving the Principal Trust, particular employees and the sub-trusts set up in respect of each employee. On such an approach, it must be determined whether the payments by the relevant employer into the Principal Trust, and in due course the payments from the Principal Trust to the various sub-trusts, were derived from the employment of the employees in question. If they were, they amounted to the employees’ emoluments or earnings.

Application of the principle to the facts

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[59] The facts found by the majority of the First-tier Tribunal are set out above at paras 6–15 and the relevant documentation is described at paras 16–24.

Certain of the findings in fact were made for the purpose of dealing with the Ramsay argument that formed the main contention for HMRC before both First-tier and Upper Tribunals. Nevertheless, enough is said to allow full consideration of the new argument based on a redirection of earnings. First, in relation to employees other than footballers, the critical element is that bonuses were paid on the basis of the work performance of the employee in question, qua employee, and the profitability of his employing company. Thus the amount of the bonus was determined by reference to the employee’s employment activities. While the bonuses were discretionary, and there was no contractual entitlement to them, it is very obvious that they were derived from and based on the work done by the particular employee. On any realistic view of the transactions under consideration, that conclusion is inevitable. The First-tier Tribunal considered that the benefit was “a mere discharge of an employer’s obligation to an employee”, but that ignores the manner in which any such obligation arose. Any obligation was created in our opinion by the decision of the employer to pay a bonus in recognition of the work performed by the relevant employee; we refer to our comments at paras 13, 15, 25 and 26 above.

Furthermore, it is not in our opinion necessary that there should be any prior obligation provided that the payment itself can be shown to be remuneration for the employee’s services. The mere making of a payment is sufficient to give rise to an emolument or earnings; this is discussed at para.62 below. On the foregoing basis, we are of opinion that the sums received by the trustee of the Principal Trust and in due course by the trustees of the sub-trusts amounted to a mere redirection of income and thus constituted emoluments or earnings of the employees in question.

[60] In relation to footballers, when a contract of employment was concluded, an additional side-letter provided for a discretionary trust payment (para.14 above). It seems to us to be self-evident that the obligations in the side-letter were part of the employee’s employment package, and provided him with additional remuneration. They were negotiated as part of the total employment package; that is made clear not only by the findings of fact narrated by the First-tier Tribunal but also by the typical documentation relating to footballers that is referred to at paras 22–24 above. The amount of any bonus was typically negotiated by the footballer’s agent as part of his overall responsibility for securing proper remuneration for the footballer’s services. That fact seems to us to be decisive by itself. The First-tier Tribunal expressed the view that the obligation in the side-letter was not an emolument,

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as it was a discharge of an employer’s obligation to an employee. We have difficulty in understanding this statement. Furthermore, for the reasons stated at para.16 above, we are of opinion that the statement that the obligation in the side-letter amounted to the “discharge” of an employer’s obligation to an employee leads inevitably to the conclusion that the payment was an emolument or earnings; any prior obligation must have been an obligation to pay some kind of remuneration for the employee’s services. Once it is accepted that the bonus payments represented consideration for a footballer’s services qua employee, it inevitably follows that those payments represented emoluments or earnings of the footballer in question.

[61] Once payments were made to trustees, they obviously became subject to the trust purposes of the Principal Trust and in due course a sub-trust set up for the particular employee concerned. Nevertheless, as the First-tier Tribunal found, those sub-trusts were constituted in the name of a particular employee, and the employee in question completed a letter of wishes naming the family members who were to benefit under the sub-trust. In addition the same employee would complete a loan application. Thus the sub-trusts were requested by employees and were designed to provide benefits to their families.

The result, as we have indicated at para.26 above, was that funds held by trustees of a sub-trust were held as trust property for the benefit of the named beneficiaries, usually members of the employee’s family, and they were thus subject to the tax regime applicable to trusts. After payment had been made by the employer, the employee could not be subject to further liability to income tax in respect of those monies. It follows that the existence of the trust arrangements and the loans made by trustees to the employee in question were irrelevant to the question of whether there was a redirection of earnings.

The redirection of earnings occurred at the point where the employer paid a sum to the trustee of the Principal Trust, and what happened to the monies thereafter had no bearing on the liability that arose in consequence of the redirection. The position is exactly analogous to that found in Hadlee v IRC. In that case the payment was made to the taxpayer’s wife, but the principle would have been equally applicable if it had been made to trustees for his wife or other members of his family. That is the present case. The trust and loan arrangements are ultimately irrelevant.

[62] As will be apparent from the foregoing discussion, we are of opinion that it is immaterial that there was no contractual entitlement to the sums paid to the trustee of the Principal Trust. Gratuities are subject to income tax; that has long been recognised, and the position is covered expressly by s.62(2)(b) of the Income Tax (Earnings and Pensions) Act 2003. That provision applies to gratuities if they are money or money’s worth, but the sums paid to the trustee of the Principal Trust were in the form of money; this is not a case involving benefits in kind. Furthermore, so far as the footballers are concerned, at least, it seems to us that if bonuses had not been paid they might well have taken their services elsewhere. We realise that the fifth respondent was in, potentially, a difficult financial position, competing for good players in an international market where other countries may not have the same rigorous approach to taxation as the UK. Nevertheless, the law is clear: the payments made in respect of footballers were in our view derived from their employment, and thus the payments were emoluments or earnings. We also reject the argument that taxing the payments made to the trustees of the Principal Trust and the sub-trusts would give rise to potential double taxation, for the reasons set out above at para.25 and in relation to Forde & McHugh Ltd v Revenue and Customs Commissioners, discussed in the following paragraphs.

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[63] For the purposes of the Ramsay principle it is frequently important to determine whether or not the sums paid have been placed at the unreserved disposal of the employee: Aberdeen Asset Management Ltd v HMRC, is an example of such a case. In dealing with the redirection of income, however, it will not normally be relevant whether or not sums are at the employee’s unreserved disposal.The employee chooses to redirect part of the consideration for his employment—emoluments or earnings—to trustees for specified trust purposes. In so doing he obviously hopes that those trustees will apply the funds in the manner that he has requested, in this case in accordance with the letters of wishes. He nevertheless runs the risk that they will not do so.

Whatever happens, the sums paid to the trustees were redirected from income, and that is enough to render them liable to income tax in the ordinary way.

[64] It is in our opinion immaterial that the payments from the Principal Trust to the sub-trusts and out of the various sub-trusts resulted from the exercise of a trustee’s discretion, which the First-tier Tribunal have found to be a genuine discretion. If a payment amounts to a reward for services, it is apparent from the decision in Brumby v Milner that it is immaterial that it is made through the exercise of a trustee’s discretion. In any event, we consider that even if the trustee exercised its discretion in a manner unfavourable to the employee’s family, that would simply be a risk that he ran when he redirected his earnings to a trust. It does not alter the character of the earnings.

[65] Finally, we are of opinion that the relevant payment of emoluments or earnings is that made by the employer to the trustee of the Principal Trust. The critical feature of emoluments or earnings is that they represent consideration for services provided under a contract of employment, and such consideration is ultimately provided by the employer. Thus the critical point when it can be said that an emolument or earnings have been paid is when the employer makes a payment either directly to the employee or in a manner that has been requested or at least acquiesced in by the employee. In the present case the payment to the trustee of the Principal Trust occurred [at] the point when funds left the employer, and they were made to an entity that had been selected by the employee (through the arrangements in the side letters), or at least acquiesced in by the employee, as the manner in which the funds would be channelled to his own sub-trust.

[66] We accordingly conclude that the primary argument presented for HMRC is correct: the payments made by the respondents to the trustee of the Principal Trust in respect of employees were emoluments or earnings, and are accordingly subject to income tax. Furthermore, those payments were made at the time of payment to the trustee of the Principal Trust, with the result that the obligation to deduct tax under the PAYE system fell on the employer who made such a payment.

Further cases

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[67] A number of other cases were discussed at length in the course of submissions, and we propose to say something about these. Perhaps the most significant was Forde & McHugh Ltd v Revenue and Customs Commissioners. It concerned an unapproved retirement benefits scheme set up by a company for employees through the medium of a trust. The company made a contribution in the form of cash and Treasury stock for the benefit of a director. The director had no immediate realisable interest in the fund held in his name; his enjoyment of it depended on his surviving to retirement age, although the trustee could apply the proceeds to benefit a defined discretionary class if he predeceased retirement. HMRC claimed that the contribution made by the employing

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company amounted to “earnings…paid to or for the benefit of an earner” for the purposes of liability to Class I NICs under s.6(1) of the Social Security Contributions and Benefits Act 1992. It was held by the UK Supreme Court, reversing a majority of the Court of Appeal, that the concept of “earnings” in the context of NICs looked to what the employee received from his employment, and not to what had been paid by his employer. Consequently, as the director had not received the sums paid by the company during the period prior to his retirement, they were not subject to NICs. [68] The discussion of the issue begins (para.14 of Lord Hodge’s opinion in the UK Supreme Court) by noting that “earnings” in the legislation governing NICs is not to be equated with “emoluments” in the legislation governing income tax. The payment to the trust was agreed by both parties to have been “for the benefit” of the director. HMRC, in a submission described as “remarkable”, asserted that payment into the trust fund was earnings “because it was a sum paid as the quid pro quo for past or future services”. If that were correct, earnings would be paid to an earner both when assets were transferred to a pension scheme to be held on trust and also when payments were made from the trust fund. That approach was rejected, for three reasons. First, it was essentially counter-intuitive that a person should earn remuneration both when money was paid into the trust and later when the trust fund was paid out; the same argument could apply to a bonus put into a trust and payable to the employee in the future when some future event, such as a specified performance level, occurred. Such a result should not be attributed to Parliament without a clear indication that it was intended. Secondly, the Revenue’s view involved looking exclusively to what was paid by the company and ignoring what the earner received; that, however, would deprive the word “earnings” of any meaning, as the expression “earnings are paid” would amount to a statement that “payments are made” in respect of any one employment. The word “earnings” pointed towards what the employee received from his employment.

Thirdly, if the payment into the trust were treated as earnings, that failed to take account of the existence of the contingency that the director survive until his retirement date. If he had predeceased, the trustees would have paid the proceeds of the fund to a member of the defined discretionary class, probably his wife. On that basis it could not be said that the director received anything through the transfer, other than the entitlement to a future pension once the condition that he reached retirement age had been purified. On that basis, the value to be attributed to the director’s entitlement would not be the value of the assets paid into the fund but rather the value of his contingent right to the fund as it would be at his retirement date; that would not be a simple calculation.

[69] In our opinion this decision is readily distinguishable from the present case. In the first place, Forde & McHugh is concerned primarily with liability to NICs rather than income tax. For the tax years 2001/02 and 2002/03 it is “emoluments” that are subject to income tax, under ss.19 and 131(1) of the Income and Corporation Taxes Act 1988. Lord Hodge makes it clear at the outset of his opinion that “earnings” under the 1992 Act were not the same as “emoluments” under the 1988 Act. For the tax years from 2003/04 onwards, tax is due on “earnings”, in terms of ss.6 and 7 of the Income Tax (Earnings and Pensions) Act 2003, but this is subject to the special statutory definition in s.62 of that Act. That definition is different from that applicable to NICs, and includes anything that constitutes an emolument of the employment.

That is a point of distinction. In the second place, Lord Hodge’s first reason for rejecting the wide concept of “earnings” propounded by the Revenue was the fact that that would lead to double taxation. That does not apply in the

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present case, however. In this case we have held that the payment made by the employing company to the Principal Trust is subject to income tax but payments out of the trust will not be so subject. The funds in question will be held by the relevant trustee as trust capital, and any payment of the fund originally received from the employing company will accordingly be treated for tax purposes as a capital payment out of a trust. The only liability to income tax is on income earned by the trustees, for example by investment of the trust funds. In these respects, however, the situation is no different from an employee who uses part of his post-tax income to fund a trust for the benefit of his family. In such a case the amounts that he received as income are transformed into capital in the hands of the trustees, and become subject to the ordinary tax regime governing funds held in trust. There is no double taxation.

[70] In the third place, the view that we have adopted does not deprive the words “emoluments” or “earnings” of any meaning in the relevant parts of the 1988 and 2003 Acts. The sums paid to the trustee of the Principal Trust are earned by the employee, and the net result is no different from an employee who uses post-tax income to fund a trust for the benefit of his family. In the fourth place the computation of tax is not especially complicated. When funds are paid to the trustee, they represent consideration for the employee’s services, and are taxable accordingly. When sums are paid out of the trust, that is an entirely different matter, subject to a different tax regime. In the fifth place, in para.20 of his opinion Lord Hodge notes that no argument had been advanced as to whether a payment into a pension or bonus fund might properly be analysed as a payment out of the earner’s salary, as in Smyth v Stretton.

Thus Forde & McHugh is not concerned with the arguments advanced in the present case.

[71] A further significant case is Edwards v Roberts, where an employee’s service agreement provided that, in addition to annual salary, he should have an interest in a “conditional fund”, which was to be created by his employer by the payment, following the end of each financial year, of part of its profits to the trustees of a fund to enable them to acquire shares in the employer. The employee was entitled to receive part of the capital of the fund after five years if he was then in the employer’s service. The taxpayer left his employment, with his employer’s consent, after six years, and the trustees transferred to him the shares that they had acquired on his behalf over the preceding five years.

The taxpayer was assessed to Sched.E tax in the year of payment on the whole value of the shares so transferred. He contended that the assessment should have been restricted to the sums paid by his employer to the trustees in that year, because that was what amounted to an emolument of that year. The Court of Appeal held, with some hesitation, that the assessment had been properly made. The sum made over was an emolument that accrued and was payable not in the years when payments were made into the conditional fund but in the year when the payment was made out of that fund. Counsel for the present respondents submitted that if HMRC’s argument in this case were correct Edwards should have been decided in favour of the taxpayer, on the basis that the sums paid into the conditional fund were taxable in each of the years when they were made. In our opinion this does not follow. In considering Edwards it is important to bear in mind that a critical feature of the Court of Appeal’s reasoning was that the taxpayer was not entitled to anything until the lapse of six years, and his right could have been entirely defeated if he had, for example, left his employment during that period: see Lord Hanworth MR at pp.35–36. In the present case, by contrast, the various trustees became entitled to funds immediately, to hold them as redirected income of the employee in

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question. The position is the same as that in Smyth v Stretton and Hadlee v IRC, and is distinguishable from Edwards v Roberts.

[72] In Heaton v Bell, the taxpayer was employed by a company which introduced a voluntary car loan scheme for certain employees. Under the scheme the company bought the cars, paid their insurance and road tax, and lent them to employees who applied to join the scheme. A sum of money was then deducted from the weekly wages of the employee. A majority of the House of Lords held that the effect of these arrangements was that the employee’s monetary wage remained unaltered, as part of his earnings.

Consequently Sched.E tax was payable on the full amount. Lord Morris of Borth-y-Gest, part of the majority, referred (at pp.753–754) to the principle that, to be taxable, perquisites must be a cash or money payment or must be money’s worth in the sense that it can be turned to pecuniary account. The free use of a car, however, did represent money’s worth and was accordingly taxable. In the present case the sums payable to the trustees of the Principal Trust and in due course the trustees of the various sub-trusts took the form of cash; consequently we are of opinion that the requirement for money or money’s worth does not preclude the present payments from being treated as emoluments.

[73] Two further cases provide examples of the application of the redirection principle. First, in Collins v Revenue and Customs Commissioners, the taxpayer sold shares in a company. A substantial sum was paid by the purchaser of the shares to the company, subject to a condition that the purchaser should procure that the company made a pension contribution on behalf of the taxpayer into a scheme designed by him. It was held by Henderson J that the payment to the company which was ultimately transferred into the scheme was part of the consideration paid for the shares. It was immaterial that the sum in question was not payable to the taxpayer himself but to the company, and it was equally irrelevant that the agreement specified what the company was to do with the payment: see para.29. That seems to us to be a clear application of the redirection principle. Secondly, in Sloane Robinson Investment Services Ltd v HMRC Commissioners, employees’ bonuses derived from the employing company’s profits were used to finance shares awarded to those employees, although the employee could have directed that they be paid as cash or as a donation to a third party. The First-tier Tribunal held that the result of the arrangements was to create a contractual entitlement, enjoyed as an employee, to a share of the final profits of the employer for a particular year.

That allocation of profit was thus due to the employees “as the fruits of their employment” and was received in that capacity. That was so even though the employee was entitled to redirect the sums in question. That again appears to us to be a clear application of the principle.

[74] We were also referred to Dextra Accessories Ltd v Macdonald, a case involving an employee benefit trust funded by a group of employing companies.

Under the trust income and capital were to be paid and applied as the trustee might think fit to for the benefit of members of a class comprising present and future officers and employees of the companies and a defined group of connected individuals. The directors provided the trustee with a schedule of employees to whom it was requested that the trustees consider providing benefit. Subsequently various benefits were provided to three shareholder directors, the wives of two directors and the mother of two directors. The critical question was ultimately held to be whether the employers’ contributions were “potential emoluments” within s.43(11) of the Finance Act 1989, and hence deductible from the employing companies’ tax liability. The Special

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Commissioners and the judge of first instance held that they were not potential emoluments, because they were not paid until after the end of the relevant accounting period. That decision was reversed by the Court of Appeal, whose decision was upheld by the House of Lords. The notion of “potential” emoluments was concerned with what might happen in the future, rather than any present intention on the part of the trustees of the benefit trust. On that basis, on the ordinary use of language, the whole of the funds paid to the trustees were potential emoluments: see Lord Hoffmann at paras 15–20.

Before the Special Commissioners the Revenue presented an alternative argument that allocation of monies to a sub-fund in respect of an employee was a benefit in kind taxable under the general provisions for taxing such benefits. For the taxpayers it was contended that the charging provision relied on, s.154 of the Taxes Act 1988, required actual rather than potential benefits.

That argument was accepted, on the basis that the Revenue’s interpretation could result in double taxation as the benefit could be charged when a subfund was created and when a subsequent benefit was paid. Counsel for the respondents relied on this case as indicating the importance of avoiding double taxation. Nevertheless, we are of opinion that the decision is not relevant because, as explained above, the present case cannot involve double liability to income tax.

[75] Reference was also made to the decision of the Special Commissioners in Sempra Metals Ltd v Revenue and Customs Commissioners. That case was concerned with an employee benefit trust into which bonuses were paid; the employee had a choice between taking a bonus in cash or having it paid into the trust. The critical question, arising under s.43 of the Finance Act 1989, was whether there could be a deduction from profits when payments were made into the trust. The Commissioners focused on the meaning of the word “payment”, a matter which is discussed at paras 139–142 of their opinion. It was held that the word “payment” has no settled meaning but takes its meaning from its statutory context. When money was placed unreservedly at the disposal of directors by a company, that was equivalent to payment. If a transaction were deliberately structured to include an element of uncertainty with no commercial purpose then the composite effect should be considered as it was intended to operate without regard to the possibility that it might not work as planned. We note that Scottish Provident Institution v Inland Revenue Commissioners, is an example of such a situation. On the facts of Sempra Metals, the Commissioners concluded that the payments made by an employer to trusts set up to hold employees’ bonuses did not amount to the payment of money or a payment equivalent to cash, with the result that they were not taxable. For the Revenue it had been contended that payments to the trusts were placed unreservedly at the disposal of the employee in question. The Commissioners thought, however, that it was necessary to have regard to the existence of the trusts, the continuing discretion of the trustee and the existence of loans made to certain of the employees who benefited from the trust (para.142). The employees were not free to do whatever they liked with the allocated funds; they could apply for loans or request the making of investments, but the final decision remained within the discretion of the trustee. In our opinion that decision should not be followed. The fact that funds are paid to trustees at the request of an employee does not mean that no payment has been made; a payment of emoluments or earnings is made, but it is redirected by the employee to another person. This is not affected by the existence of trust purposes or by the discretion enjoyed by the trustee. The employee has chosen to have his emoluments or earnings paid to a trustee to be held for particular

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purposes and takes the risk that the trustee may not apply them as he wishes.

For that reason we consider that we should not follow the decision in Sempra Metals.

[76] Finally, in UBS AG v Revenue and Customs Commissioners, two banks provided bonuses for employees by funding an offshore company which was not controlled by the bank. Shares in the offshore company were transferred to employees of the bank, subject to temporary restrictions which were subsequently lifted. One of the questions argued was whether the employees were “entitled to payment” of earnings in terms of Rule 2 of s.18(1) of the Income Tax (Earnings and Pensions) Act 2003; that subsection defines when money earnings are to be received for the purposes of income tax, and r.2 specifies that that includes “the time when a person becomes entitled to payment of or on account of the earnings”. It was held by the Upper Tribunal that it could not be said that in these circumstances the employees were “entitled to payment” of the amount of the bonuses. The rule was intended to deal with the position where a present right to present payment of the earnings had accrued but actual payment was delayed or withheld: para.64. In the case under consideration, it could not be said that any of the relevant employees, even those with guaranteed minimum bonuses, became entitled to immediate payment of the bonuses awarded to them: para.71. A similar approach was taken by the Court of Appeal: paras 67 et seq.

[77] Implicit in this approach, however, is the proposition that if an employee is entitled to payment of a bonus that can, realistically, be considered as money, he is treated as receiving it as soon as he becomes entitled to payment of the bonus. That is accepted by the Court of Appeal, at paras 71 and 75, where it is emphasised that the employees in question were only entitled to shares, not money; therefore an entitlement to a bonus was transmuted into an entitlement to shares before the bonus became due. In the present case, by contrast, the bonus was a money bonus that was actually paid, albeit to trustees. That brings it within r.1 of s.18(1), not r.2; r.1 provides that money earnings are to be treated as received at the time when payment is made. The bonus was paid not to the employee but to trustees for members of the employee’s family, but that is, as indicated above, a mere redirection of income and does not avoid liability to income tax. For the respondents it was submitted that it was necessary for liability to income tax on a bonus that there should be a present entitlement to payment of money or money’s worth. We disagree with that proposition. The fact that a payment is made is sufficient to produce a liability to income tax.

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The second issue: whether an employee qua protector had power to obtain trust funds absolutely

[78] Our decision on HMRC’s primary submission is sufficient to determine the appeal in their favour. Nevertheless we were presented with arguments on their secondary submission, and we will consider that, albeit somewhat more briefly. The submission was that the appointment of monies by the trustee of the Principal Trust on to each sub-trust was made on terms that placed those monies at the unreserved disposal of the employee and hence constituted a payment of taxable earnings, taxable in the hands of the employee. Central to the argument was the fact that the employee was appointed as protector of the sub-trust. By exercising his powers as protector, it was said, the employee had power to exclude all of the existing beneficiaries of the sub-trust, appoint himself sole beneficiary and wind up the sub-trust. In that way he could take the monies settled on the sub-trust absolutely. The appointment of monies to the sub-trust accordingly placed those monies at the unreserved disposal of

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the employee and constituted a payment of taxable earnings, taxable in the hands of the employee.

The trust deeds

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[79] The relevant provisions of the trust deeds creating the Principal Trust and representative sub-trusts are set out above, at paras 15 et seq. In each case an individual was appointed protector. In the case of the Principal Trust there was originally no protector, although MGML had certain responsibilities as the founder, but the deed of variation of 28 January 2002 by cl.1.1.9 appointed Sir David Murray as protector. The only parties to that deed were MGML and the then trustee; the other companies that had adhered to the trust by the deeds of adherence executed in May 2001 were not parties, and thus were not bound by the appointment of Sir David Murray as protector. Nevertheless, we do not think that this point is of practical significance for present purposes. In relation to the various sub-trusts, in most cases the employee connected with the sub-trust was appointed protector; the provisions of a typical sub-trust are quoted above at para.19. The protector was given a fiduciary power to alter the provisions of the deed constituting the sub-trust, although this was subject to certain important limitations; these prevented the protector from exercising the power in a manner that would adversely affect the trustee, unless the trustee’s consent were obtained, and from exercising the power to alter the clause that contained the basic declaration of trust. In some cases the powers of the protector were expressly declared to be fiduciary; in others they were not so declared. In the case of the Principal Trust, following its amendment, Sir David Murray’s power to alter the provisions of the deed was declared to be absolute and not a fiduciary power.

D The relevant principles

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[80] The argument for HMRC is that, where an employee was appointed protector of a trust set up for his family, he was able to use his powers as protector to amend the trust purposes in such a way that he alone would be the beneficiary; other beneficiaries would be removed and he would be appointed the sole beneficiary. On that basis it was said that the funds paid into a sub-trust were placed unreservedly at the disposal of the protector, in such a way that he had practical control over those funds. The relevant legal principle, which is explained in Garforth v Newsmith Stainless Ltd and Aberdeen Asset Management plc v HMRC is that if money is placed unreservedly at the disposal of an employee—if it is under the employee’s practical control—it will be treated as a payment for the purposes of the PAYE legislation. That is clear from the following passage in Garforth (at pp.413–414): “I therefore come back to the question whether, on the facts of the present case, there was ‘payment’ to the directors. The argument really was, on the one hand, that all that happened was that the balances in the directors’ loan accounts with the taxpayer company were increased without them getting anything out of it unless and until they withdrew their money from the taxpayer company, and, on the other hand, that the money was placed unreservedly at their disposal, they could have had it at any moment they chose, and that amounts to payment. As between those two contrasting views, I have no hesitation at all in saying that, in my judgment, when money is paid unreservedly at the disposal of directors by a company, that is equivalent to payment.”

That passage was cited with approval in Aberdeen Asset Management at para.33.

It was there indicated that money is a medium of exchange, and therefore the

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crucial question in practical terms was whether the funds had been placed in a position where as a practical matter they might be spent by the employee as he wished; it was at that point that the employee could be said to obtain the benefit of the funds. Thus it was the fact that the employee had practical control over the disposal of the funds that was sufficient to constitute a payment for the purposes of the PAYE legislation.

A

Application to the facts

[81] The critical question for the purposes of HMRC’s argument is accordingly whether each employee had practical control over the disposal of the funds placed either in the Principal Trust (in the case of Sir David Murray) or in the relevant sub-trusts. It is the position of the employee as protector that is critical for that purpose. HMRC contended that the First-tier Tribunal and the Upper Tribunal had misapplied the foregoing test. They had treated the relevant test as being one of “absolute right” or “absolute entitlement” (First-tier Tribunal at para.231; Upper Tribunal at paras 65–67) rather than the question of whether as a practical matter the sums paid are placed unreservedly at the disposal of the employee. We agree that the test is not one of absolute right, and is properly categorised as involving practical control over the funds in such a way that they are placed unreservedly at the disposal of the employee, so that they may be spent by the employee as he wishes. It therefore appears that the First-tier Tribunal addressed the wrong test, and in this were affirmed by the Upper Tribunal.

[82] It is, however, critical to HMRC’s argument that an employee qua protector should have control over the disposal of the funds held in trust, so that he can determine how they should be applied and if necessary alter the trust purposes so that he is the sole beneficiary. That depends on the powers of the protector. The protector is an institution that until recently was unknown in Scots or English law. It appears to have originated in offshore trusts during the 1980s. The institution is discussed in the Scottish Law Commission’s Discussion Paper on Supplementary and Miscellaneous Issues relating to Trust Law (DP No 148, 2011), at Ch.11, and their Report on Trust Law (Scot Law Com No 239, published on 22 July 2014), at Ch.15. Although these were prepared with a view to the reform of the law of trusts in Scotland and the present trusts are subject, generally, to the law of England and Wales, they are based on detailed consideration of the law in a range of jurisdictions, including the offshore jurisdictions where the institution of the protector has been pioneered. In the Discussion Paper and Report reference is made to an article

by Donovan Waters, an eminent Canadian lawyer, “The Protector: New wine in old bottles?” in which the function of a protector was described as being: “to ensure that the trustee of (an offshore) trust, so many miles away from the settlor and invested with the settlor’s property, was actually and efficiently discharging the various trustee duties”. In this way the settlor, or truster, might exercise a degree of control, or at least influence, over the trustees. The Scottish Law Commission notes at para.15.3 of its report that it is generally seen as essential to prevent a protector from being regarded as a trustee, as that may have very serious tax or estate planning consequences. The First-tier Tribunal, at para.103(v), suggest that a protector enjoys extended powers in respects resembling trusteeship, but without title to the trust assets. We would endorse that statement; generally speaking it is essential that a protector should not be equiparated with a trustee. Nevertheless, as the Scottish Law Commission indicates, protectors’ powers can still be fiduciary in nature, and different jurisdictions have taken different approaches to the question of

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whether the duties of a protector are or are not fiduciary. Thus the duties of a protector may or may not be fiduciary.

[83] The notion of a fiduciary duty is of great importance in a number of areas of the law. We were referred to the decision of the Court of Appeal in Bristol and West Building Society v Mothew, where Millett LJ (at p.18) describes a fiduciary relationship as follows: “A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the singleminded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary.”

We are in broad agreement with that description, although it might be said that it fails to recognise the breadth of fiduciary relationships and the different features of each of them. In this respect, the trustee of a traditional trust may be contrasted with the trustee of a trust set up for commercial purposes, or an agent in a commercial transaction. Nevertheless, the fundamental point is that in any matter falling within the scope of the fiduciary relationship the fiduciary is always obliged to put the principal’s interests before his own.

[84] In the case of a protector, his primary function is to ensure that the intentions of the truster or settlor are protected and enforced. Enforcing those intentions obviously includes ensuring that the trust purposes laid down by the truster or settlor are fulfilled. It follows, in our opinion, that normally a protector will owe fiduciary duties; in this connection we note that the Scottish Law Commission recommended (at para.15.18 of its report) that a protector should be subject to fiduciary duties in the exercise of his or her office. Some jurisdictions, such as the Cook Islands and Guernsey, expressly make the office non-fiduciary, but that seems to us to be an exception to the norm for which express provision is made. So far as English law is concerned, that being the legal system that governs the majority of the present trust documents, we are of opinion that a protector will normally owe fiduciary duties, but that this may be excluded by the express terms of the trust deed or other deed appointing him protector. In the absence of express, or possibly clearly implied, exclusion, however, the office of protector will carry fiduciary responsibilities.

We reach that conclusion from first principles, but it accords with the views of the authors of Underhill and Hayton, Law of Trusts and Trustees (18th edn, 2010), at para.1.79, and of the authors of Lewin on Trusts (18th edn) para.29– 41; (19th edn, 2015), para.29–45 approved in Jersey by Commissioner ClydeSmith in Re Representation of Centre Trustees (CI) Ltd at para.23.

[85] The fiduciary duties will obviously be owed to the settlor, but those duties include ensuring that the trust purposes are properly enforced. For that reason the fiduciary duties must also operate in favour of the beneficiaries, who are the persons that the settlor intends to benefit. That would mean that, in any question between the protector qua fiduciary and the beneficiaries of the trust, the protector is generally obliged to put the interests of the beneficiaries before his own. In particular, if a protector is subject to fiduciary duties, he cannot exercise his powers in such a way as to deprive the beneficiaries chosen by the settlor of their existing rights and put himself in

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their place. That would amount to the clearest of breaches of fiduciary duty; a fiduciary must always put the interests of those in whose interests he acts above his own.

[86] In the present case we are of opinion that the duties of a protector will be fiduciary in every case where there is no express declaration to the contrary.

With some of the sub-trusts the appointment of a protector is expressly declared to be fiduciary; in others nothing is said. In all those cases we are of opinion that the appointment is fiduciary in nature; that follows from the essential nature of a protector’s responsibilities, which are intended to secure the enforcement of the trust purposes, including the rights of the beneficiaries. In the case of the Principal Trust, when Sir David Murray was appointed a fiduciary in the deed of variation of 28 January 2002, it was expressly declared that the appointment was not fiduciary. In that case, however, the protector is prohibited, by cl.9.2.5, from altering the definition of “excluded persons”.Those persons are prohibited from being beneficiaries (cl.1.1.4), and they include any person connected with the founder (MGML). That category would include Sir David Murray. Thus Sir David Murray could not exercise his powers as protector in such a way as to make himself a beneficiary, notwithstanding the expressly non-fiduciary nature of his office.

[87] Furthermore, in other cases the protector is invariably prohibited from altering any of the provisions of the clause containing the declaration of trust (normally cl.2). That clause requires that the trust fund and income should be held on trust for one or more of the principal beneficiaries. The principal beneficiaries are defined in the interpretation clause (normally cl.1.1.4) as meaning the chosen relatives of the person appointed protector. For HMRC it was argued that the prohibition on altering the declaration of trust did not affect the definition of the principal beneficiaries. We are of opinion, however, that that would not be a proper interpretation of the sub-trust deeds. The purpose of the declaration of trust is to define who the beneficiaries of the trust are, and the principal beneficiaries as defined in the interpretation clause are the chosen beneficiaries. If, therefore, the definition of the principal beneficiaries could be altered by the protector in such a way as to appoint himself as the sole beneficiary, that would subvert the fundamental purpose of the declaration of trust in cl.2. That in our opinion is something that was not contemplated by the deeds constituting the sub-trusts. Thus the argument for HMRC would also fail on the ground that the protector, under the terms of the declarations of trust affecting the sub-trusts, had no power to change the definition of the principal beneficiaries.

[88] For the foregoing reasons we are of opinion that HMRC’s secondary submission must fail.To the extent that the position of the protector is fiduciary, removing the existing beneficiaries and appointing himself in their place would amount to a clear breach of fiduciary duty. In any event, such an appointment would be subject to limitations on the power of the protector to amend the trust deed, which prevent the alteration of the fundamental declaration of trust, including the definition of the beneficiaries of that declaration. In the case of the Principal Trust, Sir David Murray qua protector is unable to exercise his powers in such a way as to benefit himself because of the express terms of the deed.

[89] One further argument might have been relevant. Two general defences are available to a prima facie breach of fiduciary duty: the conduct may have been specifically authorised in the deed or other arrangement that creates the fiduciary duty (the trust deed in a traditional trust) or the persons for whose benefit the duty exists may have consented to the conduct that would otherwise

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constitute a breach of fiduciary duty: so far as Scotland is concerned the law is stated in the Stair Memorial Encyclopaedia, vol.24 at para.173, and similar principles apply in other jurisdictions, including England and Wales. In the present case there can be no question of consent by the beneficiaries of the fiduciary relationships (the beneficiaries nominated in the various declarations of trust). In some cases it might be argued that the appointment of a protector, in context, is in such terms that the protector may override all fiduciary duties and appoint himself as a beneficiary.While that remains a theoretical possibility, we are of opinion that there is nothing in the present case that would produce such a result. The beneficiaries of the various sub-trusts are carefully defined, and the plain intention of the declarations of trust is that it is those beneficiaries that should benefit from the trust. The protector is in a wholly different position from the named beneficiaries. It is true that he will normally have received a loan from the trustees, but that is a quite different matter from taking a benefit under the trust, if only because the loan is subject to an obligation of repayment.

Thus the general defences that are available in respect of a breach of fiduciary duty do not apply, and the result remains that HMRC’s secondary argument must fail.

PAYE and the principal trust

D

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F

[90] The last matter for consideration is the application of the PAYE legislation in the light of our opinion. We heard submissions on it on behalf of HMRC, but not on behalf of the respondent. We have concluded, at para.65 above, that a payment of emoluments or earnings was made at the point where the relevant employer made a payment to the trustee of the Principal Trust. The result of that is that the incidence of PAYE is quite straightforward: the obligation to deduct tax under the PAYE legislation falls on the employer who pays the sum to the Principal Trust. That follows from the ordinary application of s.203 of the Taxes Act 1988.

[91] If that had not been so, HMRC’s alternative contention was that a payment of emoluments or earnings was made when the trustee of the Principal Trust made payment to the trustee of the relevant sub-trust. In that event, it was submitted, an employer other than MGML would be among the beneficiaries of the Principal Trust, with the result that the trustee of that trust could be regarded as an intermediary of the employer in terms of s.687(4)(b) of the Income Tax (Earnings and Pensions) Act 2003, or alternatively s.203B(4) of the Taxes Act 1988. The result under ss.687 and 203B, would be that the employer was treated for the purposes of the PAYE regulations as making a payment of earnings in respect of which it was liable to PAYE. In the case of MGML, it was submitted that the deed of variation of November 2002 was of no effect, and that accordingly MGML was in the same position as other employers in respect of its own employees. In view of our conclusion that the payment to the Principal Trust constituted emoluments or earnings, we do not find it necessary to reach a decision on the foregoing arguments.

Conclusion

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[92] For the foregoing reasons we will accordingly allow HMRC’s appeal on the first ground advanced by them. On that basis we will answer the fourth question in the appeal in the affirmative, and hold that the First-tier Tribunal erred in allowing the original appeal and that the Upper Tribunal erred in refusing the appeal before it. The other questions in the appeal do not therefore arise. The assessments to PAYE have been correctly made, for the reasons already discussed. On that basis we will recall the orders of the First-tier and

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2016 S.C.L.R.

Adv Gen for Scotland v Murray Group Holdings (IH)

521

Upper Tribunals and affirm the determinations appealed against, including that relating to PAYE, with the exception of the determinations and decisions concerning Sir David Murray in relation to the Bel Azur property transaction, which is conceded by HMRC. We will reserve the question of expenses in view of the history of the appeals.

For the appellant: Ghosh QC, D Thomson, instructed by the Office of the Advocate General, Edinburgh.

For the fifth respondents: R Dunlop QC, Richardson, instructed by Brodies LLP, Solicitors, Edinburgh.

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09/11/16 12:39 PM

A COURT OF SESSION

24 November 2015

Inner House (Second Division) Lady Smith, Lord Brodie and Lady Clark of Calton B

SECRETARY OF STATE FOR WORK AND PENSIONS

Appellant

against YVETTE ROBERTSON

Respondent

Process—Appeal—Competency—Appeal from Upper Tribunal— Appellant appealing decision in his favour—Whether competent— Social Security Contributions and Benefits Act 1992 (c.4), s.73—Tribunals Courts and Enforcement Act 2007 (c.15), s.13 C

D

E

F

G

Regulation 12(1A) of the Social Security (Disability Living Allowance) Regulations 1991 (SI 1991/2890) provides, inter alia: “(1A)(a) For the purposes of 73(1AB)(a) of the Act (mobility component for the visually impaired) a person is to be taken to satisfy the condition that he has a severe visual impairment if— (i) he has acuity, with appropriate corrective lenses if necessary, of less than 3/60; or (ii) he has visual acuity of 3/60 or more, but less and 6/60 … … (b) For the purposes of section 73(1AB) (a), the conditions are that he has been certified as severely sight impaired or blind by a consultant ophthalmologist. (c) In this paragraph— (i) references to visual acuity are to be read as references to the combined visual acuity of both eyes in cases where a person has both eyes; (ii) references to measurements of visual acuity are references to visual acuity measured on the Snellen Scale; (iii) references to visual field are to be read as references to the combined visual field of both eyes in cases where a person has both eyes.”

Section 13 of the Tribunals Courts and Enforcement Act 2007 provides, inter alia: “Right of appeal to Court of Appeal, etc.

(1) For the purpose of subsection (2), the reference to a right of appeal is to a right to appeal to the relevant appellate court on any point of law arising from the decision made by the Upper Tribunal other than an excluded decision.

(2) Any party to a case is a right of appeal …

(3) That right may be exercised only with permission (or, in Northern Ireland, leave).

(4) Permission (or leave) may be given by— (a) the Upper Tribunal, or (b) the relevant appellate court, …

522

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Secretary of State for Work and Pensions v Robertson (IH) 523

(11) Before the Upper Tribunal decides an application made to it under subsection (4), the Upper Tribunal must specify the court that is to be the relevant appellate court as respects the proposed appeal.

(12) The court specified under subsection (11) in relation to a proposed appeal is whichever of the following courts appears to the Upper Tribunal to be the most appropriate – (a) the Court of Appeal in England and Wales; (b) the Court of Session; (c) the Court of Appeal in Northern Ireland.”

Section 14 of the 2007 Act provides, inter alia: “Proceedings on appeal to Court of Appeal, etc.

(1) Subsection (2) applies if the relevant appellate court, in deciding appeal under section 13, finds that the making of the decision concerned involves the making of an error on a point of law.

(2) The relevant appellate court— (a) may (but need not) set aside the decision of the Upper Tribunal, and (b) if it does, must either— (i) remit the case to the Upper Tribunal or, where the decision of the Upper Tribunal was on an appeal or reference from another tribunal or some other person to the Upper Tribunal or that other tribunal or person, with directions for its reconsideration, or (ii) re-make the decision. …

(7) In this section ‘the relevant appellate court’, as respects an appeal under section 13, means the court specified as respects that appeal by the Upper Tribunal under section 13(11).”

In an appeal at the instance of the Secretary of State for Work and Pensions; the appellant sought to appeal a decision of the Upper Tribunal, which was in his favour. As a result of doubts as to the competency of such an appeal, the court appointed an amica curiae. The issue at the hearing was restricted to the competency of the appeal.

The respondent suffered from a condition known as retinitis pigmentosa, and was virtually blind. She applied for the higher rate of the mobility component of Disability Living Allowance, but her visual acuity measured on the Snellen Scale was measured so as to be outside the measure for the higher rate, as prescribed by the 1991 Regulations. On that basis she was refused payment of the higher rate and she appealed to the First-tier Tribunal, which allowed the appeal and granted the higher rate. The appellant appealed to the Upper Tribunal. At the Tribunal she contended that a feature of her condition was that she is photophobic in bright light and that her visual acuity outdoors was materially less than when she was indoors in artificial lighting. The level of her visual acuity outdoors had not been measured on the Snellen Scale.

The Upper Tribunal raised the question as to whether the regulation was compatible with the claimant’s rights under art.14 of the ECHR and whether the regulation complied with the Secretary of State’s equality duties under the Equality Act 2006. The tribunal allowed the appeal and held that the appellant remained entitled to the care component at the middle rate but was not entitled to the higher rate. In giving the decision the tribunal issued written reasons which included a conclusion that the dependence on the Snellen Scale test was discriminatory for the purpose of art.14 of ECHR and unless there was an objective and reasonable justification for the discrimination reg.12(1A) was ultra vires and could not be read in a way which was compatible with Convention rights as provided by s.3(1) of the Human Rights Act 1998. Also

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in making the regulation the appellant did not have due regard to his equality duty as provided by s.49A of the Disability Discrimination Act 1995 read with the Equality Act 2006 and was separately ultra vires. However the court accepted that it had no jurisdiction to reduce or set the regulation aside. The appellant wished to challenge the finding that the regulation was ultra vires.

Counsel for the appellant submitted that s.13(1) of the 2007 Act gave a right of appeal on any point of law arising from a decision made by the Upper Tribunal other than an excluded decision and thus the only limitation was that the appeal was on “any point of law arising from the decision”. Here, the appellant’s position was that the Upper Tribunal had made an error of law and that error arose from the decision made by the Upper Tribunal.

Counsel for the respondent submitted that there was a question as to whether the respondent had standing to participate given that it was accepted that the decision of the Upper Tribunal that the respondent had not qualified for the higher rate of the mobility component was correct. Although it was accepted that the respondent had no personal interest in the appeal that did not mean that there was not a question of discrimination that should be addressed if the appeal were to proceed. There was a live issue relating to the interest of a class of claimants for the mobility component of DLA. It had been held that the House of Lords had discretion to hear an appeal on an issue of public law involving a public authority, even if there was no longer a lis between the parties.

The amica curiae argued that the extent of the court’s jurisdiction under s.13 of the 2007 Act came down to what was a decision. A distinction could be drawn as between that part of the determination which provided for the disposal of an issue, on the one hand, and the reasons adopted for that particular disposal on the other. While an appeal might be competent against a favourable decision where the decision was tied to unfavourable reasons, if it was not proposed that the outcome should change then something else about the decision must change as a result of a successful appeal for the appeal to be competent.

Held that the appellant proposed that the court should have found, in terms of s.14(1) that the “making of the decision concerned” involved the making of an error of law” despite the fact that the appellant had not suggested that there was anything whatsoever wrong with the decision in the sense of the operator act and the appellant’s position was that the decision was correct, but the appellant nevertheless wished the court to find that the making of the decision involved the making of an error of law, but the court could not find that the making of the decision by the Upper Tribunal involved the making of an error on the point of law which the appellant wished to bring under review (para.48); and appeal dismissed as being incompetent.

Cases referred to:

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Alleyne v Attorney General of Trinidad and Tobago [2015] UKPC 3 AXA v Lord Advocate [2011] UKSC 46; 2012 S.C. (U.K.S.C.) 122; 2011 S.L.T. 1061 C and others Application for Judicial Review, Re, (No 2) [2008] N.I. 287 Macnaughton v Macnaughton’s Trustees, 1953 S.C. 387; 1953 S.L.T. 240 M v Home Office [1994] 1 A.C. 377; [1993] 3 W.L.R. 433; [1993] 3 All E.R. 537 M v Scottish Ministers [2012] UKSC 58; (S.C.) 2013 S.C.L.R. 98; 2013 S.C. (U.K.S.C.) 139; 2013 S.L.T. 139 R v Secretary of State for the Home Department, ex parte Salem [1999] 1 A.C. 450; [1999] 2 W.L.R. 483; [1999] 2 All E.R. 42 R (Evans) v Attorney General [2015] UKSC 21; [2015] A.C. 1787; [2015] 2 W.L.R. 813; [2015] 4 All E.R. 395

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Secretary of State for Work and Pensions v Robertson (IH) 525

Mc E v Prison Service of Northern Ireland [2009] UKHL 15; [2009] 1 A.C. 908; [2009] 2 W.L.R. 782; [2009] 4 All E.R. 335 Morina v Secretary of State for Work and Pensions [2007] EWCA Civ 749; [2007] 1 W.L.R. 3033; [2008] 1 All E.R. 718 R (J M) v Croydon London Borough Council [2010] W.L.R. 1658 R (Zoolife International Ltd) v Secretary of State for Environment, Food and Rural Affairs, [2007] EWHC 2995 Secretary of State for Work and Pensions v M S (DLA) [2013] UKUT 0267 Secretary of State for Work and Pensions v Brade [2014] CSIH 39; (I.H.) 2014 S.C.L.R. 737 2014 S.C. 742; 2014 S.L.T. 680 Sheltered Housing Management Ltd v Jack [2008] CSIH 58; 2009 S.C. 109; 2008 S.L.T. 1058.

A

B

The full circumstances of the case and the arguments of counsel are to be found in the following opinion of the court which was delivered by Lord Brodie on 24 November 2015.

LORD BRODIE

C

Parties to the appeal and issue to be determined

[1] This is an appeal to the Court of Session under s.13 of the Tribunals Courts and Enforcement Act 2007 at the instance of the Secretary of State for Work and Pensions against a decision of the Upper Tribunal dated 7 February 2014.

The respondent is Ms Yvette Robertson. Because of its doubts as to the competency of an appeal by the appellant against a decision which, in its result, finds for the appellant, the court appointed an amica curiae in the person of Ms Wilson QC. In the hearing before us on 23 October 2015 the appellant was represented by Mr Johnston QC and Mr Gill. The respondent was represented

by Mr Mitchell QC and Mr Cobb. Ms Wilson QC also appeared.

[2] The hearing on 23 October 2015 was restricted to the issue of the competency of the appeal and so, accordingly, is this opinion. While the issue is a relatively narrow one, in order to give it context it is necessary to say something about the decision that the appellant wishes to bring under appeal and the factual and procedural history leading up to that decision.

E

The respondent’s entitlement to the higher rate of the mobility component of disability living allowance as at the date which is relevant for the purposes of this appeal

[3] The respondent suffers from a condition known as retinitis pigmentosa.

She is virtually, albeit not completely, blind.

[4] Visual acuity may be measured on the Snellen Scale. The Snellen Scale is a measure by reference to a test in which a person reads rows of letters of decreasing size on a chart from a distance of six metres. The lower the row on the chart that a person can read, the better his visual acuity. Normal vision is denominated as 6/6 and lesser degrees of visual acuity are denominated by lower numerators and higher denominators. Thus, a person whose visual acuity is denominated as 6/36 can only read from six metres what a person with normal vision can read from 36 metres. On the relevant date for the purposes of this appeal the respondent had a visual acuity of a maximum of 6/36 in both eyes. At all relevant dates she has been in receipt of Disability Living Allowance (DLA).

[5] A feature of the respondent’s condition is that she is photophobic in bright light. This difficulty in coping with bright light means that her visual acuity outdoors is materially less than when she is indoors in artificial ambient

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lighting. It is only possible to take a measurement on the Snellen Scale in an indoor clinical setting. Accordingly, the level of the respondent’s visual acuity outdoors cannot and has not been measured by reference to the Snellen Scale.

[6] As provided by s.71 of the Social Security Contributions and Benefits Act 1992, DLA has two components, a care component and a mobility component. Entitlement to the mobility component of DLA is determined by s.73 of the 1992 Act, as amended by s.14 of the Welfare Reform Act 2009. As is provided by s.73(10) and (11) there are two weekly rates at which the mobility component of DLA may be paid, the higher rate and the lower rate.

[7] Among the conditions of eligibility for the mobility component of DLA is that provided by s.73(1AB), which is that a person “has such severe visual impairment as may be prescribed”. Subsection (1AB) is one of several provisions of s.73 which create conditions under which a person who (despite other disabilities) is physically capable of walking, may nevertheless be entitled to the mobility component of DLA at the higher rate: 1992 Act, s.73(1)(ab).

[8] What amounts to “severe visual impairment” for the purposes of s.73(1AB) of the 1992 Act is prescribed by reg.12(1A)(a) of the Social Security (Disability Living Allowance) Regulations 1991 [1991 SI/2890]. Regulation 12(1A) was inserted into the 1991 Regulations by the Social Security (Disability Living Allowance) (Amendment) Regulations 2010 [2010 SI/1651].

It prescribes “severe visual impairment” as follows: [His Lordship quoted the regulation as set out above and continued:] Accordingly, the entitlement to the higher rate of the mobility component of DLA of a visually impaired person who is physically capable of walking, such as the respondent, is dependent on her visual acuity, as measured on the Snellen Scale, being less than 3/60.

[9] As indicated above, at the relevant date, when the respondent’s visual acuity was measured indoors by reference to the Snellen Scale, it was denominated as 6/36. So measured the respondent did not have “severe visual impairment” as that expression is to be understood for the purposes of s.73(1AB) of the 1992 Act and, therefore, the respondent did not meet any of the relevant statutory criteria for entitlement to the higher rate of the mobility component of DLA, notwithstanding that her visual acuity outdoors was materially less than that indoors.

Later developments

[10] Without conceding their relevance to the issue of whether the appeal was competent, parties drew the attention of the court to two developments which have occurred subsequent to the relevant date.

[11] The first development is that by reason of a deterioration of the respondent’s visual acuity she has been awarded the higher rate of the mobility component of DLA with effect from 31 March 2014 by virtue of a supersession decision dated 2 June 2014.

[12] The second development is that with effect from 8 April 2013, by virtue of s.77 of the Welfare Reform Act 2012, DLA has been in the process of replacement by a new benefit known as Personal Independence Payment (PIP). Eligibility for PIP is determined by the Social Security (Personal Independence Payment) Regulations 2013 [SI 2013/377]. Over time the majority of those currently in receipt of DLA will be in receipt of PIP. Procedural history prior to the appeal to this court

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[13] The respondent applied to the appellant for a review of the assessment of her entitlement to DLA. An assessment had been previously made on 29 June

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Secretary of State for Work and Pensions v Robertson (IH) 527

2010 when it had been determined that she was entitled to the mobility component but at the lower rate. By decision dated 7 December 2011 the appellant decided, inter alia, that although she remained entitled to the mobility component at the lower rate, having regard to her level of visual acuity measured by reference to the Snellen Scale, the respondent was not entitled to the higher rate. The respondent appealed the decision of 7 December 2011 to the Firsttier Tribunal (Social Entitlement Chamber). Following a hearing at Irvine on 19 September 2012, by decision dated 29 October and issued on 31 October 2012, the First-tier Tribunal upheld the respondent’s appeal and revised the decision of the appellant by finding the respondent entitled to the higher rate of the mobility component of DLA. The First-tier Tribunal felt able to arrive at this conclusion while not disputing “the arithmetic in relation to Snellen” and “notwithstanding the exact terms of reg.12(1A)”, because having regard to the evidence from the respondent and the consultant ophthalmologist’s report which had been produced, the respondent’s visual acuity outdoors would be “less than 6/36 and, on the balance of probabilities, also ‘less than 6/60’ ”.

[14] The appellant appealed to the Upper Tribunal on the ground that the tribunal had no discretion under reg.12(1A) and that, as the claimant had a visual acuity of 6/36 as measured in the Snellen test, she did not qualify for the higher rate of the mobility component. That this was an objective test had been confirmed by the decision of Judge Bano in Secretary of State for Work and Pensions v M S (DLA) (.

[15] The Upper Tribunal (as constituted by Upper Tribunal Judge Sir Crispin Agnew of Lochnaw Bt QC) directed that there should be an oral hearing and had raised the question, if Judge Bano’s decision was correctly decided, did this raise an issue of discrimination in the application of the test: “to a person such as the claimant who has Retinitis Pigmontosa which is sensitive to light and therefore that in bright light the visual acuity is affected in circumstances (where) other persons suffering from visual impairment would not be affected”?

Sir Crispin had given directions in which he had asked for submissions to be made, at the oral hearing, on the following issues: “1. Is the regulation, as construed by Judge Bano in CDLA/1899/2012, compatible with the claimant’s rights under art.14 of the ECHR? 2. Does the regulation comply with the Secretary of State’s equality duties under the Equality Act 2006?

3. If the regulation, as construed by Judge Bano in CDLN1899/2012, is not compatible with the claimant’s rights under art.14, can the regulation be construed in a manner that is compatible—s.3(1) of the Human Rights Act 1998?

4. If the regulation, as construed by Judge Bano in CDLN1899/2012, is not compatible with the Secretary of State’s equality duty, is that something to which (the Upper Tribunal) can have regard or can the regulation only be challenged in a judicial review? The jurisdiction point should be answered, whatever view the parties might take of whether or not the equality duty has been complied with.”

[16] Having heard submissions at the oral hearing, on 7 February 2014 Sir Crispin issued the following decision of the Upper Tribunal: “The appeal is allowed.

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“The decision of the tribunal given at Irvine on 19 August 2012 (sic) is set aside.

“The Judge of the Upper Tribunal remakes the decision that the Firsttier Tribunal ought to have given. It is as follows: (1) the appeal is refused (2) the appellant remains entitled to the care component at the middle rate with effect from 10/08/2011 for an indefinite period (3) the claimant has no entitlement to the higher rate of the mobility component, but remains entitled to the lower rate from 10 August 2011 for an indefinite period.”

[17] The decision of 7 February 2014 was accompanied by written reasons.

Having summarised the earlier procedure, the relevant regulations and the factual position, Sir Crispin continued: “18. Judge Bano allowed the Secretary of State’s appeal saying: “ ‘11. As the tribunal in this case recognised, it may equally be difficult to see why entitlement to a benefit which is concerned with mobility out of doors leaves out of account the claimant’s visual acuity in an outdoor environment. However, I have come to the conclusion that reg.12(1A) (a)(i) must be read as applying only to an actual and not a hypothetical, Snellen Scale measurement.

12. Unlike the previous functional tests of visual disablement, it seems to me that the test in the new reg.12(1)(a) of the 1991 Regulations is intended to provide an objective and consistent yardstick of entitlement.

At the cost of penalising some claimants for whom the test does not provide an accurate indication of their visual impairment when out of doors, the new test relies on a scientific measurement of visual acuity carried out in controlled and standardised conditions. I agree with Mr Heath that it cannot have been intended that the provision should apply to the results of a hypothetical test carried out in conditions in which the test cannot in practice be performed. For those claimants like the appellant in this case, whose visual acuity varies according to the brightness of the surrounding light, it would in any case be impossible to say what measurement should be used for the purposes of determining the claim.

13. The new reg.12(2A) of the 19891 DLA regulations specified in precise detail the conditions which have to be satisfied in relation to both visual acuity and visual field defects in respect of one or both eyes in order for a claimant to qualify as severely visually impaired. If the regulation were taken as applying to anything other than actual Snellen Scale measurements, it would in my view introduce into the test elements of judgment and interpretation which the very prescriptive terms of the new regulation were intended to exclude.’

19. On a straight reading of reg.12(1A), I agree with the decision of Judge Bano that the intention is to have an objective yardstick to measure visual acuity. A claimant therefore either qualifies or does not qualify for the higher rate of mobility component depending on the Snellen test result alone.”

There then follows […] a discussion of what was canvassed before the Upper Tribunal judge on the four issues which he had identified. Among his conclusions on these matters are the following: he agrees with the decision of Judge Bano that the intention of reg.12(1A) is to have an objective yardstick to measure visual acuity (para.19); a claimant therefore either qualifies or does not qualify for the higher rate of mobility component depending on the Snellen

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test result alone (para.19); the effect of the regulation relying solely on the Snellen test is discriminatory for the purposes of art.14 of ECHR and unless there is an objective and reasonable justification for the discrimination reg.12(1A) is ultra vires (paras 22 and 24); reg.12(1A) has no reasonable or objective justification and is accordingly ultra vires (para.37); reg.12(1A) cannot be read in a way which is compatible with Convention rights as provided by s.3(1) of the Human Rights Act 1998 (para.39); in making the regulation the appellant did not have due regard to his equality duty as provided by s.49A of the Disability Discrimination Act 1995, read with the Equality Act 2006 and therefore the regulation is separately ultra vires, because it was enacted without regard to that equality duty (paras 40–42); holding the regulation ultra vires does not benefit the respondent in that it is reg.12(1A) which confers entitlement to higher right mobility component for those who qualify, holding it ultra vires would not give rise to an additional entitlement (paras 43 and 44); the Upper Tribunal judge makes no formal decision that the regulation is a nullity because he has no jurisdiction to reduce or set it aside (para.44); it is for the appellant to consider what action is to be taken to amend the regulation so as not to discriminate against persons such as the respondent (para.44); and in these circumstances the respondent has no entitlement to the higher rate of mobility component and accordingly the appeal has to be allowed and the decision of the tribunal set aside, the respondent being only entitled to the lower rate of mobility component (para.45).

[18] On 7 May 2014 Sir Crispin granted permission to appeal his decision of 7 February 2014 to the Court of Session.

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C

The appellate jurisdiction of the Court of Session

[19] A right to appeal from a decision of the Upper Tribunal to this court on a point of law is provided by s.13 of the 2007 Act. Section 13 provides, inter alia, as follows: [His Lordship quoted the section as set out above and continued:] [20] The powers of this court when deciding an appeal from the Upper Tribunal are as provided by s.14 of the 2007 Act. Section 14 provides, inter alia, as follows: [His Lordship quoted the section as set out above and continued:]

D

Procedure in the Court of Session

E

[21] On 19 June 2014 the appellant lodged an appeal against the Upper Tribunal’s decision of 7 February 2014. Put shortly the grounds of appeal are as follows: (1) The Upper Tribunal failed to give adequate and comprehensible reasons for its decision that reg.12(1A) of the Social Security (Disability Living Allowance) Regulations 1991 is ultra vires because it has no reasonable or objective justification and, separately, because it was enacted without regard to an equality duty.

(2) The Upper Tribunal, separately, erred in law in its decision that reg.12(1A) has no reasonable or objective justification, by failing to take material matters into account and giving weight to immaterial matters. In particular, it erred in law in its consideration of whether reg.12(1A) is manifestly without reasonable foundation in (specified respects).

(3) The Upper Tribunal, separately, erred in law in its decision that reg.12(1A) was enacted without regard to an equality duty, by failing to take material matters into account and giving weight to immaterial matters. In particular,

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530 Secretary of State for Work and Pensions v Robertson (IH) 2016 S.C.L.R. A

B

it erred in law in its consideration of whether reg.12(1A) was enacted without regard to an equality duty in (specified respects).

[22] In her answers, the respondent has taken issue with each of the appellant’s grounds of appeal.

[23] As required by the court, the appellant lodged a written note of argument on 30 January 2015. In accordance with s.14(2) of the 2007 Act it invited the court to: “(i) find that the making of the Upper Tribunal’s decision involved the making of an error on a point of law; (ii) set aside the decision of the Upper Tribunal; (iii) re-make the decision of the Upper Tribunal and refuse (the respondent’s) appeal against (the appellant’s) decision of 7 December 2011, on the basis that: (a) reg.12(1A) of the Social Security (Disability Living Allowance) Regulations was lawfully enacted; and (b) as at the date of (the appellant’s), she did not have a severe visual impairment of the kind that it prescribes.”

C

[24] Although the point was not taken by the respondent, who now accepts that as at the relevant date she was not entitled to the higher rate of the mobility component of DLA in terms of reg.12(1A), over what has been an extended procedure in the Inner House, the court has become concerned as to whether it is competent for the appellant to appeal under s.13(1) of the 2007 Act against a decision in his favour. The appeal called by order on 20 March 2015 when the court directed that the parties should address it at a hearing on the issue of competency under reference to the following issues:

D

(1) the competency of an appeal where the appellant was successful before the Upper Tribunal; (2) the extent to which the court may be used to resolve an academic question; (3) whether it is in the public interest that an appeal such as this should proceed and what will be the repercussions if it is allowed to do so; (4) what other remedies are available to each party.

E

F

[25] On 22 April 2015 the court appointed Ms Wilson QC as amica curiae to assist the court on these questions.

[26] At a hearing on 29 April 2015 the respondent stated to the court that in the event that the decision of the Upper Tribunal of 7 February 2015 was not re-made by this court the appellant would respect Sir Crispin’s reasoning on the vires of the regulation and act accordingly.

[27] On 10 April 2015 the appellant lodged a supplementary note of argument directed to the competency issue and on 16 October 2015, lodged a second supplementary note of argument. The respondent lodged a supplementary note of argument and a second supplementary note of argument on 17 April 2015 and 16 October 2015 respectively. The amica curiae lodged a note of argument on 16 October 2015.

Submissions of parties Appellant

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[28] On behalf of the appellant Mr Johnston QC adopted what appeared in his supplementary note of argument. In his submission, the starting-point in addressing the first question posed by the court on 20 March 2015 was s.13(1) of the 2007 Act which gave a right of appeal on any point of law arising from a

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decision made by the Upper Tribunal other than an excluded decision: cf, Morina vSecretary of State for Work and Pensions, Maurice Kay LJ at para.11, Re C and others’ Application for Judicial Review (No 2).What was under consideration was not an excluded decision. Thus, the only limitation was that the appeal was on “any point of law arising from a decision”. Here the appellant’s position is that the Upper Tribunal made an error of law and that error arises from the decision made by the Upper Tribunal.The Upper Tribunal’s decision is therefore amenable to appeal: cf, Morina. Nothing in the 2007 Act renders an appeal incompetent. As in Morina the appellant was seeking to change “the decision”.

[29] The decision of the Upper Tribunal was that: “the claimant has no entitlement to the higher rate of the mobility component but remains entitled to the lower rate from 10 August 2011 for an indefinite period”.

The basis of that decision could be seen in paras 37, 43 and 44 of the reasons for decision. There the Upper Tribunal judge states that the regulation is ultra vires, recognises that he cannot make a declaration to that effect, but, regarding the regulation as ultra vires, it therefore does not give rise to a claim. In essence what the Upper Tribunal had done was to conclude, with regret, that they could not find a basis upon which a higher rate award could be made and that was because regulations are ultra vires. The Upper Tribunal judge had not addressed the merits at all; his reasons depended entirely on the vires of the regulations. The appellant envisaged that, if it accepted the appellant’s contentions, the court, in exercise of its s.14 powers, would set aside the Upper Tribunal’s decision, reconsider the vires of the regulation, find it intra vires and then remit to the Upper Tribunal to consider the merits of the respondent’s claim. In response to questioning from the court counsel accepted that on one view the object was to have this court re-make what was of the nature of a backdoor declarator. Morina was helpful to the appellant’s submission that the appeal was competent in that a wish to change a decision was sufficient for there to be jurisdiction even where what was in issue was the correctness of a subsidiary finding: Re C and others’ Application Kerr CJ at p.289.There were some “winners’ appeals” which this court could and should entertain.

[30] According to Mr Johnston, allowing the appeal to go forward would give a voice to those who are currently in receipt of the relevant benefit. How else would that voice be heard? It is to be borne in mind that the Upper Tribunal have stated that reg.12(1A) is ultra vires as regards all retinitis pigmentosa claimants. Moreover, adopting an expansive approach to the question of the competency of this appeal would be consistent with the recent decision of this court in Secretary of State for Work and Pensions v Brade.

[31] As for the second question, whether the court could be used to resolve an academic question, Mr Johnston submitted that the present appeal did not raise what was simply an academic question. Rather, it involved a live point of law that was of general public importance. That was because the real practical effect of the Upper Tribunal’s decision was not limited to this particular case.

Other tribunals were wrestling with the problem that it had thrown up. The appeal was therefore a competent matter for decision; other cases depended on the point raised and this case was not fact-sensitive: Macnaughton v Macnaughton’s Trustees at p. 393; R v Secretary of State for the Home Department, ex parte Salem at pp.456457; and R (Zoolife International Limited) v Secretary of State for Environment, Food and Rural Affairs at para.36.

[32] For much the same considerations as were put forward in relation to the second question the appellant submitted that it is in the public interest that

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the appeal should proceed. While formally correct that the appellant seeks to appeal a decision in his favour, the reality is that he is faced with an authoritative decision (binding on First-tier Tribunal judges throughout Great Britain and persuasive in Northern Ireland) on the legality of reg.12(1A) which has an adverse impact on the clarity of the law and is already creating uncertainty. It was therefore important that this appeal should be determined with a view to the court providing tribunal judges with authoritative guidance about the legality of the regulation. For the court to hear this appeal would be unlikely to encourage other winners’ appeals.

[33] As for alternative remedies, the appellant did not see it as appropriate to amend regulations which he considers to be intra vires. Judicial review of the Upper Tribunal’s decision at the instance of the appellant might be available, although that was not clear given the availability of a statutory appeal. However, such application would be seeking to review the reasons given by the Upper Tribunal rather than the decision itself and therefore, were this appeal to have been held incompetent, the same logic might apply in relation to the competency of an application for judicial review. Alternatively, the respondent might apply for judicial review of the appellant’s refusal to amend the regulations on the basis that his doing so represented a refusal to act so as to give effect to the requirements of art.14 of the European Convention on Human Rights and the equality duty. That would involve bringing before the Outer House (with the possibility of a subsequent reclaiming motion) essentially the same question which was already before the Inner House. Apart from the delay and additional expense, this would mean adopting a procedure whereby parties were not able to raise points of law of general public importance directly before the Inner House by way of statutory appeal but to do so only indirectly, following: (i) a letter asking the Secretary of State to amend regulations; (ii) a decision refusing to do so; (iii) judicial review of that refusal; and (iv) reclaiming to the Inner House the decision made at first instance.

Respondent

E

F

G

5304.indd 532

[34] On behalf of the respondent, Mr Mitchell QC expressed agreement with the appellant’s position on the competency of the appeal. He recognised however that there was a question as to whether the respondent had standing to participate given that Mr Mitchell accepted as correct the decision of the Upper Tribunal that the respondent had not qualified for the higher rate of the mobility component as at the relevant date. Her position had become, if anything, more questionable on her being awarded the higher rate on 2 June 2014 in consequence of deterioration in her visual acuity subsequent to the relevant date. There was, however, in Mr Mitchell’s view, a position to be represented.

The First-tier Tribunal had held that the regulation could be interpreted so to give the respondent the mobility component at the higher rate. The Upper Tribunal had decided that this was not so but that the regulation, while giving benefit to the vast majority of blind people, discriminated against someone with the respondent’s condition. The regulation was aimed at those who were functionally blind but the regulation had missed its mark. Mr Mitchell had concluded that the decision of the First-tier Tribunal was not sound but that the drafting of the regulation was discriminatory. From the beginning of his involvement in the case, Mr Mitchell had seen the respondent as having no personal interest but, as he had explained to the court at the earliest opportunity, that did not mean that there was not a question of discrimination that should be addressed if the appeal were to proceed. The Equality and

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Human Rights Commission had been approached with the suggestion that it would be best placed to take the matter forward but the Commission had declined to become involved. The Scottish Legal Aid Board had been kept informed but whether the respondent had cover for the appeal was not clear.

However, leaving that aside, there was a practical interest to be represented in this appeal, that being the interest of a class of claimants for the mobility component of DLA, of which the respondent had formerly been one. There was a live issue. Effectively the appellant was arguing for declarator that the regulation was good. In R v Secretary of State for the Home Department ex parte Salem, the House of Lords had held that it had discretion to hear an appeal on an issue of public law involving a public authority even if there was no longer a lis between the parties. The absence of purely private interest was not determinative of standing: AXA v Lord Advocate and R M v Scottish Ministers. If the appeal was to go ahead the appellant needed a proper contradictor. The court could of course appoint an amicus curiae but in practice an amicus would “come out of the government system”. Mr Mitchell intended no disrespect to anyone in saying this but there was something less than satisfactory about counsel appointed by the executive arguing that the executive did not have power to act in a particular way.

[35] Mr Mitchell reminded the court of the undertaking on behalf of the appellant that, if the appeal goes no further, he would respect the finding of the Upper Tribunal. That, as Mr Mitchell had submitted in the supplementary note of argument for the respondent, under reference to M v Home Office at p.382C; R (JM) v Croydon London Borough Council at para.12; Alleyne v Attorney General of Trinidad and Tobago; and R (Evans) v Attorney General at para.52, was an entirely proper position to take but no more than an observance of the rule of law. The rule of law requires respect for declarators as well as decrees.

[36] As far as other remedies were concerned, agreeing with what had been advanced on behalf of the appellant, Mr Mitchell did not dispute that a party with standing could bring the matter of the vires of the regulation before the court by way of an application for judicial review but, in addition to the associated difficulties put forward on behalf of the appellant, there would be the practical problem of obtaining legal aid.

A

Amica curiae

E

[37] Ms Wilson QC recognised that the second and third questions posed by the court related to the policy as to what cases might be heard where parties were no longer at issue. While her note of argument had touched on all four of the questions posed by the court, she confined her oral submission to a reply on Mr Johnston’s submission on competency.

[38] There was, Ms Wilson explained, no Scottish authority and, indeed, no direct authority on the matter but the extent of the court’s jurisdiction under s.13 of the 2007 Act came down to what is a “decision”. A distinction can be drawn as between that part of a determination which provides for the disposal of an issue, on the one hand, and the reasons adopted for that particular disposal on the other. A decision is a disposal, in other words the order that disposes of the issue. The reasons explain why a particular disposal has been adopted. Thus, in the present case the decision of the Upper Tribunal is comprehended by that part of the determination where the judge of the Upper Tribunal re-makes the decision that the First-tier Tribunal ought to have given by: (1) refusing the appeal; (2) stating that the now respondent remains entitled to the care component at the middle rate; and (3) stating that the now

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respondent has no entitlement to the higher rate of the mobility component but remains entitled to the lower rate.

[39] While an appeal might be competent against a favourable decision where the decision is tied to unfavourable reasons, if it is not proposed that the outcome should change then something else about the decision must change as a result of a successful appeal if the appeal is to be competent.

[40] One way to test the matter in this case was to ask whether the Upper Tribunal needed to consider the vires of the regulation at all. The answer to that was no. Having decided that he agreed with the decision of Judge Bano in Secretary of State for Work and Pensions v M S (DLA) that it was not open to the First-tier Tribunal to apply a hypothetical Snellen test and that the regulation had to be given its natural meaning with the result that the respondent was not entitled to the higher rate, the Upper Tribunal judge could have stopped at the end of para.19 of his reasons for decision. The decision that the respondent was not entitled to the higher rate was based on a proper interpretation of the regulation rather than the vires of the regulation.

[41] Mr Johnston had taken more from decisions that he had cited than was warranted. In Morina the Secretary of State wished to appeal the decision of the social security commissioner that the commissioner had jurisdiction to hear an appeal from a subordinate appeal tribunal (albeit that the decision of the commissioner on the merits of that appeal was favourable to the Secretary of State). The Secretary of State sought to change that decision by establishing that the claimants’ appeals to the commissioner should have been rejected for want of jurisdiction rather than dismissed on the merits. Allowing the appeal, Maurice Kay LJ explained that it was significant that the subject-matter was a ruling by the commissioner on a fundamental legal issue. His suggestion, at para.12 of his judgment, that the jurisdiction of the Court of Appeal might rest on an exercise of discretion was not adopted by either of the other members of the court. In making his submissions Mr Johnston had conflated the question of whether the court had jurisdiction to entertain an appeal and the separate question of whether, assuming it did have jurisdiction, the court should entertain an appeal. Re C and Ors Application concerned the latter question.

What was in issue there was whether it was appropriate to certify a case as involving a point of general public importance for the purposes of s.41 of the Judicature (Northern Ireland) Act 1978 in respect of a proposed appeal to the House of Lords, where the applicants for certification had substantially succeeded in their application. It was of interest to note that when that case got to the House of Lords Lord Carswell, having noticed Morina, reserved his opinion as to whether a successful party can properly appeal against a “decision” of the Divisional Court in Northern Ireland in a criminal matter: Mc E v Prison Service of Northern Ireland at paras 76 and 77. What really mattered, submitted Ms Wilson was the framework provided by the statute. In Sheltered Housing Management Ltd v Jack a question had arisen as to what was comprehended by “decision” for the purpose of computing the time within which a party must appeal from a decision of the Lands Tribunal, having regard to the terms of rule of court 41.20(1)(b)(i). In that case the matter was determined by the express terms of s.10(6) of the Tribunals and Inquiries Act 1992. However in delivering the opinion of the court, Lord Osborne expressed the view that the “decision” is the decision of the suit by the tribunal, as opposed to its separate statements of reasons: supra at 118. This was not to say that reasons could never be part of a decision, at least if the court was inclined to adopt a wide definition of “decision”, but even with a wide definition, to be part of a decision, the reasons being challenged would need to have been necessary for the decision.

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Decision

[42] Potentially, the question as to whether the court should entertain this appeal has a number of aspects but, as each of the counsel who appeared before us agreed, irrespective of other considerations, the court can only entertain the appeal if it has power to do so and therefore, the first question to be addressed by the court is one of competency in the sense of its fundamental jurisdiction. If the court does not have jurisdiction the other questions do not arise.

[43] The Upper Tribunal is a creature of statute (2007 Act, s.3). Accordingly, if a decision made in terms of its statutory power is to be challenged by way of appeal (as opposed to judicial review) then provision for such an appeal and, therefore, the powers of the relevant appellate body to hear such an appeal must be found in a statutory measure conferring appellate jurisdiction. The only such statutory measure suggested in the present case is the 2007 Act and, in particular, ss.13 and 14 of that Act. Section 13(1) delineates the right of appeal conferred by the section as “a right to appeal to (the Court of Session) on any point of law arising from a decision made by the Upper Tribunal”.

Thus, the right is limited to appeal on point of law but it is further limited to point of law “arising from” a “decision” made by the Upper Tribunal.

[44] Conceptually, the decision of a judicial body, such as the Upper Tribunal, can be distinguished from a statement of reasons for that decision. As Lord Osborne explained in Sheltered Housing Management v Jack at para.26, the “decision” is the decision of the suit by the tribunal, the operative act which, by exercise of their jurisdiction, they resolve the issues before them. Reasons, on the other hand, comprise the rational underpinning of the decision, the explanation, which any judicial body is bound to give, why it decided and therefore exercised its jurisdiction as it did. Thus, a decision of, for example, the Upper Tribunal, and the reasons for that decision are separate things but, at least if the reasons are truly the reasons for the decision, they are linked; a decision cannot be fully understood unless one can consider the reasons. We therefore accept that in considering what is comprehended by the right of appeal conferred by s.13 of the 2007 Act “on any point of law arising from a decision” one must have regard to the reasons for the decision. It could hardly be otherwise. To take the present case as an example, the decision of the Upper Tribunal was to: (1) refuse the appeal; (2) state that the respondent remained entitled to the care component at the middle rate from the specified date; and (3) state that she was not entitled to the higher rate of the mobility component but remained entitled to the lower rate from the specified date. That was the whole decision. It was an exercise of jurisdiction to which effect could be given.

It informed parties who had won and who had lost and therefore who at first blush might have an interest to appeal. However, it gives little or no information as to whether “any point of law [arises] from [the] decision”. In order to ascertain that, one must understand why the tribunal came to their decision.

That in turn requires consideration of the reasons and if it turns out that there is a right of appeal its exercise will inevitably involve criticism of the substance or adequacy of these reasons.

[45] We therefore accept that, by its nature, an appeal on any point of law arising from a decision is likely to involve an attack on the soundness of the reasons underpinning the decision. We further accept that there can be, from the perspective of jurisdictional competency, what Mr Johnston described as “winners’ appeals”. However, irrespective of whether the would-be appellant was the winner or the loser for he or she to have a right of appeal, and therefore for this court to have jurisdiction to hear the appeal the point of law must be

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one which truly arises from the decision in the sense of there being a sufficient causal connection between them. Whether there is such a connection will depend on the circumstances of the individual case but where the point of law that a party wishes to take does not comprise a necessary part of the reasons for the decision it is unlikely that it could be said to arise from the decision.

[46] In the present case the vires of the regulation was a matter raised by the Upper Tribunal judge. Neither of the parties had an interest in pursuing the point because both were relying on the regulation and, therefore, on its validity.

For present purposes we are not concerned as to whether the doubts of the Upper Tribunal judge about the legality of the regulation were well or ill founded. However, while it was necessary for the judge to arrive at the proper construction of reg.12(1A), an exploration of whether or not it had been lawfully enacted was never going to help him to decide the appeal before him.

The issue raised by the appeal was whether the respondent, given her particular disability, was entitled to be paid the mobility component of DLA at the higher rate. In terms of s.73(1AB) of the 1992 Act, as amended, a claimant such as the respondent is so entitled if, but only if, she “has such severe visual impairment as may be prescribed”. Until a particular degree of severe visual impairment is prescribed there is no entitlement to payment of the particular rate of benefit. A particular degree of severe visual impairment was prescribed and that was by the 1991 Regulations, as amended, and in particular by reg.12(1A). Thus if, as at the relevant date, on a proper construction of that regulation the respondent did have the degree of severe visual impairment which the regulation prescribed, she was entitled to payment of the higher rate.

If the respondent did not, she was not, and that was the only basis upon which the Upper Tribunal judge could decide the appeal. (We note that was the only basis upon which he did decide the appeal.) His views as to the legality of the regulation were irrelevant when it came to deciding what was the respondent’s entitlement to benefit. As the Upper Tribunal judge correctly observed he did not have a jurisdiction to reduce or set aside the regulation. Had the respondent qualified under the regulation, as properly construed, she would then have been entitled to succeed in her appeal irrespective of the Upper Tribunal judge’s views on vires.

[47] We return then to the terms of s.13(1) of the 2007 Act and the question of whether the matter which the appellant wishes to make subject of appeal, that being that the conclusion of the Upper Tribunal judge that the regulation is ultra vires because it is discriminatory without there being objective and reasonable justification (reasons for decision paras 24, 37 and 42) is an appeal “on any point of law arising from a decision made by the Upper Tribunal”.

The answer to that question is in the negative. As the judge acknowledged, he had no jurisdiction to make a decision, in the sense of an operative act or decision of the suit as referred to in Sheltered Housing Management v Jack, as to the vires of the regulation and he did not do so. What he did have jurisdiction to do was to decide the appeal and he did that. His views on the vires of the regulation formed no part of the reasoning which brought him to that decision.

As was pointed out by Ms Wilson, the judge had completed his reasoning once he had arrived at the end of para.19 of the reasons for decision (see para.17 above in this opinion). Paragraphs 38 and 39 of the reasons for decision can be seen as reinforcing the conclusion in para.19 in that, on the hypothesis that the natural meaning of [reg.]12(1A) gives rise to incompatibility with Convention rights, in these paragraphs the Upper Tribunal judge confirms that the regulation can only be construed in the way that he has previously indicated in para.19. Otherwise, what follows para.19 of the reasons for

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decision under the headings: “Is the regulation discriminatory?”; “Is the discrimination justified?”; and “Did the Secretary of State comply with the equality duty?” are obiter dicta, in other words things said by the way or incidental remarks. It is at what appears in the reasons for decision after para.19 that the appellant wishes to direct his appeal. None of it, apart perhaps from paras 38 and 39, can be said to arise from the Upper Tribunal’s decision.

[48] One way of testing whether the appellant truly wishes to appeal a “point of law arising from a decision made by the Upper Tribunal” is to consider how the appellant proposes that this court should exercise its jurisdiction under s.14 of the 2007 Act, should the appeal be permitted to proceed. The appellant proposes that the court should find, in terms of s.14(1), that “the making of the decision concerned involved the making of an error of law”. That is despite the fact that the appellant does not suggest that there is anything whatsoever wrong with the decision in the sense of the operative act. It is the appellant’s position that the decision is correct. Nevertheless, the appellant wishes the court to find that the “making” of the decision “involved” the making of an error of law. It is of course the case that the appellant argues that the exposition of the law in paras 20–37 and 40–42 of the reasons for decision was erroneous and perhaps it would be said that that exposition involved the making of an error of law.

However, and this may be no more than reiterating the point that this part of the reasons for decision was obiter, it is difficult to see how the Upper Tribunal judge’s unnecessary and uninvited excursion into the question of the vires of the regulation, in some way became “involved” in “the making of the decision”.

Accordingly, we do not accept that the court could find that the making of the decision by the Upper Tribunal “involved the making of an error on (the) point of law” which the appellant wishes to bring under appeal. It is only if the court is able to find that the making of the decision concerned “involved the making of an error on a point of law” that s.14(2) of the 2007 Act empowers the court to do something about it by setting aside and either remitting the case or re-making the decision. In our opinion, for the reasons we have set out, the court could not get to that point irrespective of its views as to the correctness of the Upper Tribunal judge’s exposition of the law in relation to the vires of the regulation.

[49] On behalf of the appellant, Mr Johnston presented a rather different analysis of the process of the Upper Tribunal’s decision-making than that which has commended itself to us. In essence, submitted Mr Johnston, what the Upper Tribunal had done was to conclude, with regret, that they could not find a basis upon which a higher rate award could be made and that was because regulations are ultra vires. As Mr Johnston put it, the Upper Tribunal judge had not addressed the merits at all; his reasons depended entirely on the vires of the regulations.

[50] As will be apparent, we have not accepted Mr Johnston’s analysis. As far as “the merits” are concerned we do not see that more needed to be done by the Upper Tribunal. The issue in the appeal was whether the respondent’s degree of severe visual impairment was such that it met the criterion for payment of mobility component at the higher rate, that criterion being set out in reg.12(1A).The evidence led before the First-tier Tribunal and that tribunal’s findings of primary fact were not in dispute and are set out by the Upper Tribunal in paras 5–9 of the reasons for decision. The question then became whether, on these findings, the criterion was met and that depended on interpretation of the regulation. It is true, as Mr Johnston said, that the Upper Tribunal concluded, with regret, that they could not find a basis upon which a higher rate award could be made, but that was not because the regulation was

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ultra vires, it was because the respondent’s condition, as measured in the only relevant manner, did not meet the criterion which the regulation set out.

Irrespective of whether a regulation in these terms is ultra vires or intra vires, as at the relevant date the respondent did not meet the condition for payment of the higher rate.

[51] Something emphasised particularly by Mr Mitchell was that, in obedience to the rule of law, the appellant has stated to the court that if this appeal is not permitted to go forward he will feel bound by the Upper Tribunal judge’s expression of view as to the vires of the regulation. We note that but, without in any way dissociating ourselves from what was said, for example, by Lord Neuberger in R (Evans) v Attorney General, how the appellant chooses to act is a matter for him. His decision cannot confer on this court a jurisdiction that it does not otherwise have.

[52] As we have recorded, parties addressed us on each of the four questions on which the court invited submissions. We were grateful for these submissions but the issues raised in the second, third and fourth questions only arise once the court is satisfied that it has jurisdiction, in other words a (statutorily conferred) power to entertain an appeal. Once that is established the court may wish to consider whether it is appropriate to hear a particular appeal. At that stage the fact that the appellant was the successful party in the court below or that the point in issue has become academic will be relevant. However, if there is no jurisdiction that is an end to the matter. That is the state of affairs here.

[53] The appeal is accordingly dismissed as being incompetent.

For the appellant: Johnson QC, Gill, instructed by Office of the Solicitor to the Advocate General, Edinburgh.

For the respondent: Mitchell QC, Cobb, instructed by Drummond Miller LLP, Solicitors, Edinburgh.

Amica Curiae: Ailsa Wilson QC.

E

F

G

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A COURT OF SESSION

21 January 2016

Outer House Lord Tyre ESSO PETROLEUM CO LTD

Pursuer

B

against SCOTTISH MINISTERS and OTHERS

Defenders

Reparation—Contamination—Construction of motorway over area of contaminated land—Contamination migrating to neighbouring land— Whether work “inherently hazardous”—Whether employers liable for failures in duty by contractors—Whether “inherently hazardous operations” exception to the rule that employer not liable for injury caused by fault of contractor applies in Scots law

C

Words—“Inherently hazardous” The first defenders instructed the construction of a motorway near Glasgow city centre, part of which passed over an area of contaminated land, and an elevated section of the road with grass embankments was built on the area.

Although a report had been obtained to ascertain the contaminants on the site and a number of heavy metals had been identified, no mention had been made of chlorinated hydrocarbons. The report identified a number of pathways for risk of contamination of groundwater and surface water and the risk was assessed as high. As a result the tender documents contained requirements to take into account the presence of contaminated land and groundwater and the appointment of a specialist team of environmental consultants. The pursuer owned an area of land next to that part of the site which had operated as a petrol filling station until March 2013. After demolition of constructions on the site but before the commencement of construction of the Motorway halogenated chlorinated hydrocarbons were discovered on the site and a “funnel and gate” system was devised to deal with them. The system involved the construction of an impermeable barrier round the site but it was thought that if the wall was built at the meeting of the Esso site and the motorway site surface water would build up and flood the Esso site and so that boundary was not sealed. Ongoing monitoring of the Esso site revealed the presence of contaminants which the pursuer considered to be harmful.

The pursuer raised an action for reparation based on nuisance and fault contending that contamination had been caused by the first, second and third and fourth to seventh defenders. The pursuer sought decree ordaining the first defenders to prevent any further escapes; decree ordaining the defenders to carry out works to prevent recurrence; and for damages of £2,800,000. After a debate the Lord Ordinary allowed a preliminary proof restricted to three issues, namely: (i) whether the operations carried out on the site to construct the M74 Completion were inherently hazardous; (ii) whether the third to seventh defenders and the specialist design consultants were competent independent contractors; and (iii) whether the site remained under the occupation and control of the third to seventh defenders.

Held (1) that for the purposes of the instant case the exception to the general rule that an employer of an independent contractor was not liable for injury caused to a third party by the fault of a contractor was recognised to the extent that: (1) liability of an employer for negligence of or nuisance caused by an

D

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Esso Petroleum Co Ltd v Scottish Ministers (OH) 2016 S.C.L.R.

independent contractor existed in Scots law beyond the specific situation of interference with rights of support and was capable of applying more generally to operations carried out on a person’s land which caused or were likely to have caused damage or injury to or on a neighbouring property; (2) in order for liability to have arisen it was not enough to have proved that damage to a neighbour’s land had been likely to have occurred if a potentially hazardous operation was performed without taking adequate precautions but liability would have arisen only where either (a) the operation would or was likely to have caused damage to the neighbour’s land however much care had been exercised, or (b) it was necessary to have taken steps in the carrying out of the operation to have prevented damage to the neighbour’s land, and those steps were not taken by the landlord either personally or on his instructions and “necessity” should be taken as meaning steps specifically taken to avoid damage to the neighbouring property which would otherwise have occurred or have been likely to have occurred, as opposed to having taken reasonable precautions when carrying out the hazardous operation to have prevented risk of damage or injury from eventuating; (3) an employer did not escape liability for damage or injury to a neighbour’s property caused by the carrying out of inherently hazardous operations simply by giving instructions, however detailed, and the true meaning of the exception was that in circumstances where it applied, the landowner remained liable regardless of whether he carried out the operation himself or instructed another to do it; and (4) the reasonableness of the steps taken to avoid damage to neighbouring land was to be set at the time when the operation had been undertaken and not with the benefit of hindsight after damage or injury had occurred (para.23); (2) that the question which had to be decided was whether the carrying out of the operations would have or would have been likely to have disturbed the contaminants and if so whether such disturbance would have or would have been likely to lead to migration to neighbouring land (para.31); and (3) that the operations carried out on the site were properly to have been categorised as inherently hazardous operations as that expression was used in Scots law and the first defenders were not relieved of potential liability for damage to the pursuer’s land caused by negligence or nuisance by virtue of having engaged the defender as an independent contractor and having instructed it to have taken appropriate and adequate precautionary measures (para.36); and case put out by order for discussion of further procedure.

Cases referred to:

E

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Biffa Waste Services Ltd v Maschineenfabrik Ernst Hese GmbH [2008] EWCA Civ 1257; [2009] Q.B. 725; [2009] 3 W.L.R. 324 Borders Regional Council v Roxburgh District Council, 1989 S.L.T. 837 Bower v Peate (1876) 1 Q.B.D. 321 Crolla v Hussain, (Sh Ct) 1008 S.C.L.R. 774; 2008 S.L.T. (Sh Ct) 145 Dalton v Angus (1881) LR 6 App. Cas. 740 Duncan’s Hotel (Glasgow) Ltd v J & A Ferguson Ltd, 1974 S.C. 191 GA Estates Ltd v Caviapen Trustees Ltd (No 1), 1993 S.L.T. 1037 Honeywill & Stein Ltd v Larkin Bros Ltd [1934] 1 K.B. 191 MTM Construction Ltd v William Reid Engineering Ltd, (O.H.) 1997 S.C.L.R. 778; 1998 S.L.T. 211 Noble’s Trustees v Economic Forestry (Scotland) Ltd, 1988 S.L.T. 662 RHM Bakeries (Scotland) Ltd v Strathclyde Regional Council, 1985 S.C. (H.L.) 17; 1985 S.L.T. 214 Southesk Trust Co Ltd v Angus Council [2006] CSOH 6 Stephen v Thurso Police Commissioners (1876) 3 R. 535 Stewart v Malik [2009] CSIH 5; 2009 S.C. 265; 2009 S.L.T. 205 Thomson v St Cuthbert’s Co-operative Association Ltd, 1958 S.C. 380’ 1959 S.L.T. 54.

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2016 S.C.L.R.

Esso Petroleum Co Ltd v Scottish Ministers (OH)

541

The full circumstances of the case and the arguments of counsel are to be found in the following opinion of the Lord Ordinary which was issued on 21 January 2016.

A

LORD TYRE Introduction

[1] In 2005 the Scottish Ministers, who are the first defenders in this action, resolved to construct the section of motorway near Glasgow city centre known as the M74 Completion, linking the end of the existing M74 motorway at Cambuslang with the M8 motorway west of the Kingston Bridge. Through their agency Transport Scotland, the first defenders appointed Glasgow City Council as managing agent with responsibility, inter alia, for the procurement process and the land purchase and business relocation process. Land along the motorway route was acquired by agreement or by compulsory purchase.

Following a competitive dialogue procedure, the main contract for construction of the motorway was awarded on 4 March 2008 to Interlink M74 JV, the third defender in this action. As its name suggests, the third defender is an unincorporated joint venture created for the purposes of this project. Its partners are the fourth to seventh defenders, respectively Galliford Try Infrastructure Ltd, Balfour Beatty Civil Engineering Ltd, Morgan Sindall (Infrastructure) plc and Sir Robert McAlpine Ltd. By agreement dated 26 October and 6 November 2007, the third defender engaged Jacobs UK Ltd and Atkins Ltd (Jacobs & Atkins) as specialist design consultants. Work to construct the motorway began in about May 2008. Handover to Transport Scotland was achieved on 26 June 2011 and the motorway was opened for public use. A certificate of completion was issued by Glasgow City Council on 7 July 2011.

[2] The land upon which the motorway has been constructed included sites formerly used for a variety of industrial purposes. One of those sites, lying generally between Paterson Street to the west, Gloucester Street to the north, and West Street to the east, had been used since 1841 for the manufacture, bulk storage and distribution of liquid chemicals. I shall refer to it as the Albion site. By 2001 the Albion site was in the ownership of Albion Chemicals, whose business was subsequently acquired by Brenntag Inorganic Chemicals Ltd, which was the second defender in this action. By missives of sale concluded voluntarily on 30 June 2004, the Albion site was acquired by the first defenders. An elevated section of the new motorway, with grass embankments, has now been built upon the Albion site.

[3] In preparation for the M74 Completion project, and prior to entering into the construction contract, Glasgow City Council as agent for the first defenders instructed the preparation of a series of reports by the Babtie Group (who subsequently became Jacobs UK Ltd) with a view to mitigating environmental risks associated with contaminated land. In September 2003, Babtie produced a “Stage 3� report identifying appropriate remediation options for land along the proposed route. A section of this report dealt with the Albion site. The report noted the presence of a number of contaminants associated with current and previous land use, including heavy metals, asbestos and hydrocarbons (fuel, oil, phenol, solvents and polycyclic aromatic hydrocarbons). It made no specific mention of chlorinated hydrocarbons. It noted a number of pathways for risk of contamination to groundwater and surface water, including vertical migration to both shallow and deep groundwater and lateral off-site migration of contaminants in groundwater.

The risk of such migration occurring was assessed as high, and the report

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Esso Petroleum Co Ltd v Scottish Ministers (OH) 2016 S.C.L.R.

recommended further assessment and modelling of groundwater to assess impacts.

[4] Part 6 of the employer’s requirements in the final tender issued by the first defenders and accepted by the third defender was entitled “Contaminated land pollution pitigation”. Under the heading “General requirements”, the tender document provided, inter alia, as follows: “1.1 Introduction 1.1.1 The design, construction, completion and maintenance of the works shall take into account the presence of contaminated land and groundwater.

1.1.2 The contractor shall be responsible for the implementation of any supplementary ground investigation he requires to provide information for design and monitoring purposes.

1.1.3 The design shall take account of the fact that there may be isolated pockets of previously unidentified contamination. Construction and remediation activities shall take into account the potential for the existence of variable conditions not reported in the findings of the ground investigations or assessments completed to date. For this reason, the contractor shall operate strict environmental management procedures to ensure tight control of construction activities.

1.2 Objectives 1.2.1 The design, construction, completion and maintenance of the contaminated land pollution mitigation works shall achieve the following objectives: (i) The protection of all environmental receptors including humans, controlled waters, ecology and built structures, both during construction and post construction. This will be achieved by the design and implementation of appropriate mitigation and monitoring procedures … …

1.5 Qualified professional assistance 1.5.1 The contractor shall appoint for the design, construction completion and maintenance of all contaminated land pollution mitigation works a specialist team of environmental consultants. The specialist team shall be appropriately qualified and experienced in the assessment and remediation of contaminated land and brownfield sites …

1.5.2 The contractor shall employ the environmental consultants throughout the duration of the contract. The roles and responsibilities of the environmental consultants shall include, but shall not be limited to: (i) the design of contamination mitigation works, including conducting treatability studies, where applicable, during the design stage in order to verify the efficacy of the proposed design … .”

[5] At the corner of Gloucester Street (to the north) and West Street (to the east), there is a roughly square area of land owned by the pursuer, to which I shall refer as the Esso site. It is bounded to the south and west by the Albion site. Historically, the Esso site had been used as a public house until it was acquired by the pursuer in about the 1950s for redevelopment as a petrol filling station. It continued to be operated, latterly by a wholly-owned subsidiary of the pursuer, as a petrol filling station and shop until about March 2013. It is currently in a derelict condition.

[6] Demolition of buildings, tanks and other structures on the Albion site commenced in May 2007, in terms of a contract entered into between Glasgow City Council as agent for the first defenders and CEP Demolitions Ltd. The floor slabs and concrete hard standing covering the site were removed in 2008.

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Esso Petroleum Co Ltd v Scottish Ministers (OH)

543

Other works included demolition and removal of the drainage system and below-ground tanks and pipes. In 2008, after demolition had taken place but before construction of the motorway on the site had begun, investigations carried out by Jacobs & Atkins on behalf of the third defender disclosed the presence of halogenated chlorinated hydrocarbons in groundwater beneath the Albion site. The compounds identified included Tetrachloroethene (PCE), Trichloroethene (TCE), 1,2 Dichloroethene (DCE) and Vinyl Chloride (VC).

The latter two compounds are degradation products of PCE and TCE. It is known that PCE and TCE were among the chemicals stored from time to time on the Albion site. All of these compounds pose risks to human health: all are toxic and some are known or suspected carcinogens. Boreholes and trial pits were dug at locations across the Albion site; some of these were close to the Esso site boundary. The pursuer carried out its own investigations. The results obtained from the various parties’ investigations indicated that there were concentrations of PCE, TCE and degradation products including VC present in soil and water in made ground within the Albion site at levels in excess of the designers’ calculated remedial targets.

[7] It was concluded that further action was needed to mitigate the risks of off-site migration of contaminants and associated risks to human health.

Particular attention was paid to the elimination of any risk to the health of the occupants of residential properties on the east side of West Street. Various remedial options were considered. The option selected was a “funnel and gate” system, whereby potentially contaminated groundwater would be contained within the Albion site and funnelled towards an exit “gate” for collection and disposal to sewage. Jacobs & Atkins’ investigations indicated that the direction of flow of groundwater within the Albion site was generally in a southerly direction, although a possible divide in groundwater direction was noted in the northern part of the site. It was proposed that the groundwater be funnelled towards a “gate” in the south-eastern corner of the site.

[8] Containment and funnelling of contaminated groundwater within the site required the construction of an impermeable cement/bentonite barrier around the boundaries of the site. A difficulty was, however, identified with regard to the Esso site. If an impermeable barrier were constructed along the boundary between the Albion and Esso sites, Jacobs & Atkins considered that water levels would build up outside the barrier, within the Esso site, to an extent likely to cause surface flooding. Accordingly, in order to avoid long-term risk of flooding of land perceived to be upstream of the Albion site, especially within the Esso site, Jacobs & Atkins recommended that the northern boundary of the Albion site should not be sealed. The bentonite wall would be installed parallel to the site’s eastern (ie,West Street) and western (ie, Paterson Street) boundaries to direct any contaminated water towards the exit “gate” near the southern end of West Street. This recommendation was accepted and implemented.

[9] The pursuer continued to monitor levels of contamination of groundwater under the Esso site. Data collected from boreholes within the Esso site indicated a flow direction from south to northeast. Sampling of groundwater under the Esso site carried out between November 2010 and September 2014 identified an on-going presence of PCE, TCE, DCE and VC at concentrations which the pursuer regarded as representing a potential risk to human health and/or the water environment. On one occasion TCE was identified in the air during monitoring within the filling station shop, although the concentrations were well below limits set to ensure safe working conditions.

[10] In this action the pursuer contends that as a result of the works for the construction of the M74 Completion, and in particular their effect upon and

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contamination of the groundwater flow, its property at the Esso site is now subject to contamination that has migrated or escaped from the Albion site. It contends that such contamination has been caused by nuisance et separatim fault on the part of the first defenders consisting of carrying out works on the Albion land which have disturbed the contaminants and caused them to migrate via groundwater to the Esso site. Specifically, the pursuer avers that: “… It was inherent in the operations carried out by the third defenders on behalf of the first defenders that there was a danger that such chemicals stored within (the Albion site) would be disturbed, escape, infiltrate the ground water below and contaminate parts of (the Esso site) which in fact occurred. Reasonable site investigations would have revealed that risk or hazard. The exercise of reasonable care would have prevented the escape of such deleterious substances… .Further, having regard to the nature of the operations which they authorised, the first defenders are vicariously liable for the conduct of the third defenders in creating the nuisance in the course of carrying out inherently hazardous operations which interfered with the pursuers’ interests in and use and enjoyment of (the Esso site) … .”

The pursuer further contends that contamination of the Esso site has been caused by nuisance et separatim fault on the part of the third defender, and the fourth to seventh defenders as partners of the third defender, consisting of a failure to design and construct the M74 Completion works so as to prevent the migration of contaminants from the Albion site to the Esso site.

[11] The remedies sought by the pursuer include decree ordaining the first defenders to prevent any further escape of chlorinated hydrocarbons on to the Esso site as a result of the construction of the M74 Completion; decree ordaining the defenders to carry out and complete works within the Esso site to prevent recurrence, remove the contaminants and remediate the damage caused by the escape of contaminants from the Albion site; and payment of sums of damages amounting to around £2,800,000.

[12] Following a debate, Lord Doherty pronounced an interlocutor (see [2015] CSOH 21) dismissing the action insofar as directed against the second defender, Brenntag Inorganic Chemicals Ltd. Lord Doherty held, however, that certain arguments presented on behalf of the first defenders could not be determined without inquiry into the facts. By a further interlocutor dated 28 May 2015, his Lordship allowed a preliminary proof restricted to three issues, namely: (i) whether the operations carried out on the Albion site to construct the M74 Completion were inherently hazardous; (ii) whether the third to seventh defenders and Jacobs & Atkins were competent independent contractors; and (iii) whether the Albion site remains under the occupation and control of the third to seventh defenders.

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Depending upon the answers to these questions, the action insofar as directed against some of the defenders may not be maintainable.

[13] I should note that the evidence led at the preliminary proof, in the form of witness statements, expert reports and oral evidence, ranged over issues not falling within its scope. This was perhaps inevitable when expert evidence was led under reference to detailed reports produced to address the merits of the parties’ dispute. I shall, however, endeavour in this opinion to confine myself to addressing the three issues above, without attempting at this stage to work through the consequences of my conclusions in relation to those

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2016 S.C.L.R.

Esso Petroleum Co Ltd v Scottish Ministers (OH)

545

issues. Nothing in this opinion should be read as the expression of a view on the merits.

A

Issue 1: Inherently hazardous operations Legal analysis

[14] As a general rule, the employer of an independent contractor is not liable for injury caused to a third party by the fault of the contractor: Stephen v Thurso Police Commissioners. The rule has exceptions. For present purposes I am concerned with the question whether, and if so to what extent, Scots law recognises an exception where the operations instructed by the employer are “inherently hazardous”. The answer to this question is controversial. The root of that controversy may be said to be the following dictum of Lord Watson in Dalton v Angus (an English appeal) at pp.831–832: “When an employer contracts for the performance of work, which properly conducted can occasion no risk to his neighbour’s house which he is under obligation to support, he is not liable for damage arising from the negligence of the contractor. But in cases where the work is necessarily attended with risk, he cannot free himself from liability by binding the contractor to take effectual precautions. He is bound, as in a question with the party injured, to see that the contract is performed, and is therefore liable, as well as the contractor, to repair any damage which may be done.”

[15] The history of the reception of Lord Watson’s observation into the law of Scotland was traced in detail by Lord President Hamilton in Stewart v Malik at paras 10–19. Lord Hamilton noted that that reception had occurred largely through the work of textbook authors including Glegg, Gloag and Henderson, and Walker, and that (para.16): “In all these textbooks English cases are liberally cited. In none of them is it suggested that there is any basis upon which, in this field, the law of Scotland is different from that of its southern neighbour.”

His Lordship went on to list a significant number of first instance cases, in both the Outer House and the sheriff court, where Dalton v Angus has been cited and applied; I shall return to some of these later. He also noted that the view was not unanimous: for example, in Southesk Trust Co Ltd v Angus Council, Lord Macphail had doubted whether the “hazardous operations” exception was part of the law of Scotland.

[16] The difficulty with an “inherently hazardous operations” exception is that it is extremely unclear what it means. Any operation which might result in injury to person or property unless appropriate precautions are taken might be said to be inherently hazardous. Perhaps the high watermark of the scope of the exception in English law is the much-criticised decision of the Court of Appeal in Honeywill & Stein Ltd v Larkin Bros Ltd. In this case a photographer engaged to take photographs of the interior of a theatre using magnesium flares to create a flash negligently set fire to a curtain, and it was held that the company which had engaged the photographer as an independent contractor was liable to the theatre owner for the costs of repair. The principle was stated thus by the court at pp.199–200: “… If a man does work on or near another’s property which involves danger to that property unless proper care is taken, he is liable to the owners of the property for damage resulting to it from the failure to take proper care, and is equally liable if, instead of doing the work himself, he procures another, whether agent, servant or otherwise, to do it for him.”

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Esso Petroleum Co Ltd v Scottish Ministers (OH) 2016 S.C.L.R.

The problem, however, as Professor Atiyah observed (Vicarious Liability in the Law of Torts, 1967, at p.332) is that: “The truth of the matter is that damage or injury can be caused by the execution of practically any work, if it is done without due care, and conversely, that practically anything can be done without causing injury if sufficient care is taken in doing it.”

In Biffa Waste Services Ltd v Maschinenfabrik Ernst Hese GmbH, the Court of Appeal expressed the view that the doctrine enunciated in Honeywill was “so unsatisfactory that its application should be kept as narrow as possible” and that it should be applied only to activities that are “exceptionally dangerous whatever precautions are taken”. One of the contentious issues in the present case was whether that view is consistent with the position currently reached by Scots law.

[17] A further difficulty with the expression “inherently hazardous operations” is that it appears to be a legal construct without any basis in scientific categorisation. In the course of the preliminary proof, I heard oral evidence from four expert witnesses all of whom had prepared written reports, namely (for the pursuer) Mr Kelvin Hughes and Mr Tom Parker, (for the first defenders) Mr Alan Dow, and (for the third to seventh defenders) Dr Alexander Lee, all geologists with specialisations in groundwater flow modelling and remediation of contaminated land. None of these witnesses professed familiarity with the expression “inherently hazardous”: Mr Parker found it “baffling”; Mr Dow observed that it was not a phrase with which he was familiar; Dr Lee considered that the phrase was not generally used in connection with contaminated land. The expert witnesses were concerned rather to emphasise the distinction between, on the one hand, the existence of a hazard and, on the other hand, the existence of a risk of significant harm to persons or property from the hazard if appropriate steps were not taken to mitigate the risk. It therefore becomes a matter for the court to make findings of fact based upon expert evidence given under reference to criteria utilised by contaminated land specialists, and then to attempt to assess whether the circumstances fall within the scope, whatever that might be, of the exception to the legal rule of non-liability for operations undertaken by an independent contractor.

[18] In Stewart v Malik, Lord President Hamilton (with whom Lords Eassie and Marnoch agreed) did not find it necessary to decide whether the acceptance in Scottish textbooks and in the majority of first instance decisions of English law as applicable in Scotland was well founded. That case was concerned with the removal of a load-bearing wall in a ground-floor shop resulting in damage to the flat above, and the question was whether the owner of the shop, who had instructed an independent contractor to carry out the building works, was liable to the proprietor of the first-floor flat. The pursuer’s case was based upon removal of a load-bearing wall being an inherently hazardous operation, and the court identified the issue as being: “whether the works in contemplation were of such a character that, notwithstanding the careful selection of an independent contractor to execute them, the defender as lower proprietor could not be thus relieved of liability to the pursuers for their negligent execution”.

The court noted that according to the Scots law of the tenement, the defender owed an obligation of support to the pursuer as proprietor of the flat above but, importantly for present purposes, acknowledged that failure of support did not of itself, without proof of negligence or nuisance, give rise to liability

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Esso Petroleum Co Ltd v Scottish Ministers (OH)

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in reparation (Thomson v St Cuthbert’s Co-operative Association Ltd). Under reference to Dalton v Angus, the court held that the Scots law of the tenement cast on the “servient” proprietor a positive duty to avoid endangering the “dominant” property which was personal to him and could not be elided by the instruction of an independent contractor.

[19] It is noteworthy that many of the cases, both English and Scottish, on inherently hazardous operations have concerned interference with rights of support. In the present case it was submitted on behalf of the first defenders that if Scots law did recognise an “inherently hazardous operations” exception, Stewart v Malik established that it was confined to cases involving rights of support and, in line with the views expressed in England in Biffa Waste, that it should not readily be extended to other situations. I am not persuaded that there is any peculiarity about interference with rights of support that renders the exception applicable to that situation alone. I have already noted that it is settled, at least in Scots law, that non-interference with a right of support is not an absolute duty and that liability in reparation for damage caused by interference requires proof of negligence or nuisance (the latter also, of course requiring proof of fault: RHM Bakeries v Strathclyde Regional Council). What is, in my opinion, clear from Stewart v Malik is that Scots law does in certain circumstances recognise an exception from the general rule that an employer is not liable for negligence of or nuisance caused by an independent contractor.

It seems to me, however, that some further basis in principle must be identified for the application of the exception than simply restricting it to cases involving interference with rights of support.

[20] One of the Outer House decisions not concerned with rights of support is Noble’s Trustees v Economic Forestry (Scotland) Ltd. This was an action for nuisance at the instance of the owner of a hydro-electric scheme against an upstream proprietor and its independent contractor in respect of the construction of a dirt road in a manner which caused sand, silt and gravel to be washed down the river, causing damage to the hydro-electric scheme. The Lord Ordinary (Jauncey) dismissed the action insofar as directed against the upstream proprietor who had instructed the forestry operations, on the grounds that it was not averred that the operations were inherently dangerous and that the law did not impose strict liability. Citing a dictum of Cockburn CJ in Bower v Peate (a right of support case) at p.326, Lord Jauncey observed: “A landowner will be liable to his neighbour if he carries out operations on his land which will or are likely to cause damage to his neighbour’s land however much care is exercised. Similarly will a landowner be liable in respect of carrying out operations, either at his own hand or at the hand of the contractor, if it is necessary to take steps in the carrying out of those operations to prevent damage to a neighbour and he, the landlord, does not take or instruct those steps. In the former case the landowner’s culpa lies in the actual carrying out of his operations in the knowledge actual or implied of their likely consequences. In the latter case culpa lies in not taking steps to avoid consequences which he should have foreseen would be likely to flow from one method of carrying out the operation.”

[21] Lord Jauncey’s summary of the law was adopted in GA Estates Ltd v Caviapen Trustees Ltd (No.1), in which the purchaser of a shopping development sought reparation for flooding which it claimed was caused by the negligent design by the developer’s consulting engineer of a pond and culvert on neighbouring land retained by the developer. The shopping centre owner submitted that he had made sufficient averments of the undertaking of a hazardous operation (the creation of a pond and culvert in a stream running

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under the shopping centre) to bring the case within the exception. The Lord Ordinary (Coulsfield) referred to Dalton v Angus and Noble’s Trs, and also to a gloss on Dalton v Angus by Lord Dervaird in Borders Regional Council v Roxburgh District Council (a case concerning support of a neighbouring property) that “the person who instructs the work must know, or at least ought to know that the work which he is instructing is necessarily attended with risk”, and held that the shopping centre owner’s case against the developer was relevant for proof. Lord Coulsfield further commented: “Counsel for the (developer) submitted that the (developer) had employed competent consultants to design the works and had, therefore, performed (its) obligation to instruct the steps necessary to prevent damage to a neighbour. I do not think, however, that in the passage quoted, Lord Jauncey meant to imply that, in a case in which the landowner can reasonably foresee that the work will be attended by risk, he is not liable if the steps taken to avoid the risk are inadequate because of his contractor’s negligence.”

[22] Aside from the difficulty of defining the limits of the “inherently hazardous operations” exception, there are forceful policy arguments to be made both in favour of and against the imposition of liability on a landowner for the fault of an independent contractor. In favour of liability, it may be contended that the risk of damage to neighbouring land ought to be assumed by the person for whose benefit the work is being performed, and who is at liberty to seek appropriate indemnities from the contractor against negligence of or nuisance caused by the latter. The neighbouring proprietor should not have to shoulder the risk of the contractor’s inability to pay, in circumstances where he (the neighbour) has no effective control over the precautions taken to avoid damage.

Against liability, it can be argued that giving the injured neighbour a direct right of action against the employer of a negligent contractor is merely to give an unnecessary remedy against a person who is not to blame for the damage, contrary to the principle of Scots law that culpa is required for liability in respect of both negligence and nuisance. Policy considerations such as these were canvassed at the preliminary proof; a fuller discussion, with contemporary resonance, can be found at Atiyah, pp.333–336. Such considerations are, however, of limited relevance to my task as a judge sitting at first instance, which is to apply the law of Scotland as it is rather than as I may consider that it ought to be.

[23] I have already noted that the court in Stewart v Malik did not find it necessary to express an opinion of general application on the extent to which the exception is recognised in Scots law. It would be presumptuous of me to attempt to do so. For the purposes of the present case it is sufficient for me to conclude, on the basis of the foregoing authorities, that the exception is recognised at least to the following extent: 1.

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Esso Petroleum Co Ltd v Scottish Ministers (OH) 2016 S.C.L.R.

Liability of an employer for negligence of or nuisance caused by an independent contractor exists in Scots law beyond the specific situation of interference with rights of support. It is capable of applying more generally to operations carried out on a person’s land which cause or are likely to cause damage or injury to or on a neighbouring property.

In order for liability to arise, it is not enough to prove that damage to a neighbour’s land is likely to occur if a potentially hazardous operation is performed without taking adequate precautions. As Lord Jauncey observed in Noble’s Trs, liability arises only where either: (a) the operation will or is likely to cause damage to the neighbour’s land however much

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care is exercised; or (b) it is necessary to take steps in the carrying out of the operation to prevent damage to the neighbour’s land, and those steps are not taken by the landlord either personally or on his instructions. As regards alternative (b), I interpret Lord Jauncey’s reference to “necessity” as meaning steps specifically taken to avoid damage to the neighbouring property which would otherwise occur or be likely to occur, as opposed to taking reasonable precautions when carrying out a hazardous operation to prevent a risk of damage or injury from eventuating.

For the avoidance of doubt, an employer does not escape liability for damage or injury to a neighbour’s property caused by the carrying out of an inherently hazardous operation—in the sense in which I have defined that expression—simply by giving instructions, however detailed, to the independent contractor. The true meaning of the exception is that in circumstances where it applies, the landowner remains liable regardless of whether he carries out the operation himself or instructs another to do it.

The reasonableness of the steps taken specifically to avoid damage to neighbouring land is to be assessed at the time when the operation was undertaken, and not with the benefit of hindsight after damage or injury has occurred.

[24] Approaching the matter from a policy viewpoint, it does not appear to me that recognition of the exception to the above extent imposes an undue burden upon a landowner employing an independent contractor. In the first place, Scots law, perhaps in contrast to English law, requires proof of culpa in relation to nuisance as well as in relation to negligence, and it may be that the concerns which provoked the views expressed by the Court of Appeal in Biffa Waste have less force here. In the second place, as observed by Sheriff Principal Bowen in Crolla v Hussain at para.26, danger of unfairness to landowners has been avoided by the courts taking a firm line in confining the application of the exception to cases where it is the nature of the operation itself which is hazardous rather than the means of carrying it out. I express no view as to whether the exception is recognised by Scots law to a greater extent than that just outlined, as it is unnecessary to do so for the purposes of the present case. In particular, I should not be taken as accepting that the exception is capable of applying to situations other than damage to or injury occurring on neighbouring land. If it were to be so applied, an answer would have to be found to Atiyah’s example at p.331: “… If a person riding in a taxi were to tell the taxi-driver to turn right, and the driver did so without signalling, it could be said that the act of driving a vehicle across the road was necessarily attendant with risk unless precautions were adopted, that it therefore became the duty of the passenger to take those precautions, and that he should be liable for damage caused by the failure to take those precautions – a manifestly unsound conclusion.”

Liability of contractor for independent sub-contractor

[25] The discussion thus far has been concerned with liability of an employer to a third party for damage caused by the negligence of or nuisance created by an independent contractor. This case also raises—or at least on one view may also raise—the issue of the liability of a contractor to a third party for damage caused by the negligence of or nuisance created by a subcontractor carrying out an inherently hazardous operation. There is much less authority on this issue; such as there is, however, is adverse to the existence of any such liability.

In Duncan’s Hotel (Glasgow) Ltd v J & A Ferguson Ltd, another Outer House case, a ground-floor shop was badly damaged by fire and, in the course of

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extensive reconstruction, piling operations were carried out which caused damage to a hotel on the upper floors of the building. The hotel owner sued the shop owner, who convened the contractor as a third party. One of the issues debated was whether the contractor was liable for negligence or nuisance committed by its piling subcontractor. The Lord Ordinary (Stott) held that it was not, observing (p.198): “Against [the contractor] the primary case is that (the piling subcontractor) were their subcontractors, and if a building employer is to be held liable for negligence or nuisance committed by his contractor in the course of hazardous or illegal work, so a contractor must, in the same way, be liable for the subcontractor whom he employs. That is by no means a self-evident proposition. What the building employer is being held liable for is negligence or nuisance in the hazardous work which, in the last analysis, is being done for him and on his instruction, whether by himself or by his servant or by a contractor or by a subcontractor employed by him. The relationship between contractor and subcontractor is rather different. No doubt, in a sense, the contractor in employing a subcontractor is appointing someone to do part of his work for him. But the work is being done not for him but for the building employer, and there is no compelling reason to assume that in delegating part of the work to a subcontractor he is to be taken as accepting responsibility for the subcontractor’s delicts. His obligations, unlike those of his employer, do not stem from occupation or possession or interest in the end-product of the work, but merely from the terms of his contract, and if the terms of the contract do not include an acceptance of liability for a subcontractor’s delicts, it is difficult to find any principle of law apt to impose such a liability upon him.”

[26] A similar point arose in MTM Construction Ltd v William Reid Engineering Ltd, in which a main contractor sued a welding sub-subcontractor for damage caused to machinery owned by the main contractor when a building went on fire, allegedly due to the negligence of the welding sub-subcontractor. The Lord Ordinary (Abernethy) expressed agreement with Lord Stott’s opinion and held that only the ultimate employer had a co-existent liability (together with the party who carried out the allegedly negligent operation) for the negligent performance of works which were “extra-hazardous and inherently dangerous” resulting in loss to a third party. (I observe in passing that it is noted at the end of the report of this case that a reclaiming motion was granted without the issuing of a written judgment.)

[27] In the absence of any contrary authority, I conclude that Scots law does not render a contractor liable to a neighbouring landowner for damage caused by the negligence of or nuisance created by a subcontractor carrying out an inherently hazardous operation in the sense in which I have used that expression.

Application to the circumstances of the case

F

G

5304.indd 550

[28] It should be emphasised at the outset that the operation whose inherent hazardousness falls to be assessed is the construction of a section of the M74 Completion on the Albion site. It is not, for the avoidance of doubt, the carrying out of the protective measures, including the construction of the bentonite impermeable barrier, that were determined to be necessary following the 2008 investigations. Applying the test which I have identified above, it is therefore necessary for me to make a finding as to whether the construction of that section of the motorway was either (a) likely to cause damage to the Esso site however much care was exercised, or (b) likely to cause such damage unless appropriate steps were taken specifically to avoid damage to the Esso site which

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would otherwise occur or be likely to occur. As I have noted, the assessment must be made at the time when the operations were commenced and not with the benefit of hindsight. I am also not here concerned with the reasonableness or adequacy of the steps that were in fact taken; that is a matter for another day.

[29] Adopting the terminology of the expert witnesses, the hazard founded upon by the pursuer in the present action was the presence, at the time of commencement of site preparation operations on the Albion site, of chlorinated hydrocarbons in soil or groundwater within the site. The risk said to exist was that without adequate precautionary measures being taken, chlorinated hydrocarbons would or would be likely to migrate, in groundwater or otherwise, to locations including the Esso site where they or their degradation products could pose a significant risk to human health.

[30] I can deal shortly with the first of these elements, namely the existence of the hazard. It was not disputed by either the first or the third to seventh defenders that prior to commencement of any demolition works, the Albion site was contaminated by PCE, TCE, 1,2 DCE and VC as a consequence of the chemical storage and other works which were carried on there over a period of many years. That was the conclusion of Mr Parker, which was accepted by Mr Dow, at least in his oral evidence, and by Dr Lee. I am therefore able to make a finding in fact to that effect.

[31] As regards the second element, the parties’ respective positions after the preliminary proof were as follows. The pursuer invited me to find in fact that the first defenders ought to have known, and did know: (i) that the carrying out of operations on the Albion site would disturb the above contaminants; and (ii) that such disturbance would lead to their migration on to neighbouring land including the Esso site. The first defenders submitted that I could find only that the operations might disturb the contaminants and that such disturbance might lead to migration on to neighbouring land. The third to seventh defenders’ position was somewhat different in that Dr Lee had been asked to express an opinion as to whether operations on the Albion site were “exceptionally dangerous whatever precautions [were] taken”, ie, the formulation used by the Court of Appeal in Biffa Waste. As discussed above I regard this formulation as somewhat too narrow to represent current Scots law; the question as I see it is whether the carrying out of the operations would or was likely to disturb the contaminants and, if so, whether such disturbance would or was likely to lead to migration to neighbouring land. It is on that basis that I turn to examine the evidence.

[32] The possibility of contamination of groundwater, and of off-site migration of contaminants in groundwater, was identified in the 2003 Babtie report (see para.3 above) in which it is stated (p.6): “PATHWAYS “Potential pathways for risks to controlled waters (groundwater and surface water) from on-site soil contamination include: infiltration and leaching from soil and vertical migration to both shallow and deep groundwater; lateral off- site migration of contaminants in groundwater towards surface waters, namely the Kinning House Burn; and leaching from soil, entering the drainage system and/or backfill surround to underground services/structures, with subsequent lateral migration along the service lines to surface waters.”

Babtie identified, inter alia, a high risk of contamination of shallow groundwater, with a “substantial” potential magnitude of consequence. Direct contact and leaching to groundwater was assessed as likely and the risk as “high”.

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Esso Petroleum Co Ltd v Scottish Ministers (OH) 2016 S.C.L.R.

[33] On 26 November 2008, after demolition and site clearance had taken place, Jacobs & Atkins reported as follows: “The site area associated with the former Albion Chemical Works and operational Esso petrol filling station on West Street forms part of the Kingston Bridge/Port Eglinton Chainage (0m–1500m) of the M74 Completion. The various phases of ground investigation and detailed quantitative risk assessment completed concluded that there were no unacceptable risks identified to end users of the site or the water environment.

However, there remained a residual risk of lateral off-site migration of contaminated water within the Made Ground combined with volatilisation and inhalation of VOCs. This could potentially affect an off-site residential receptor to the east of West St. This is a current development converting a former warehouse to flats in this area.

“Detailed quantitative risk assessment reported within the West Street Addendum Report indicated that there are concentrations of tetrachloroethene (PCE), trichloroethene (TCE) and daughter products including Vinyl Chloride (VC) present in soil and water within the Made Ground at levels in excess of the calculated remedial targets. It was therefore concluded that further action is needed to mitigate the risks of off-site migration of contamination and associated risks to human health.”

[34] In his report, Mr Parker explained the risk as follows. Information in the Babtie report and in desktop studies suggested that there were contaminants in the sub-surface of the Albion site. The act of carrying out investigative and remedial works on site had the potential for mobilisation of contaminants in three ways:

D

• removal of the concrete hard standing would allow additional rainfall recharge into the subsurface that would leach contaminants in the unsaturated zone into the shallow groundwater; • removal of the drainage system would potentially mobilise contaminants within the drains and within the bedding surrounding the drainage system; and • removal of below-ground pipe runs between tanks, which were notorious sources and pathways for contaminants in the subsurface, would release those contaminants into groundwater.

E

F

G

5304.indd 552

It was necessary to take measures to avoid migration of contaminants to neighbouring land while site preparation work was being undertaken.

[35] Mr Dow agreed that operations on ground containing contaminants had the potential to mobilise those contaminants; that contaminants which entered groundwater could, under certain circumstances, migrate to other ground; that the work carried out on the Albion site involved disturbance of the land which had the potential to disturb chlorinated hydrocarbons present there unless such disturbance was managed; and that if no steps were taken to manage the disturbance it was likely that the contaminants would migrate to other land. The Babtie report showed that there had been appreciation prior to commencement of work on site of potential offsite migration of contaminated groundwater. For his part, Dr Lee noted in his report that archaeological digs and site works may have led to the “smearing” of substances of concern within shallow soils, and to an increase in infiltration resulting in contaminant mobilisation and dissolution. He also agreed that changes in surface cover could contribute to local recharge increasing groundwater flux.

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Conclusion

[36] As will be apparent, there was little if any dispute among the geologists on this aspect of the evidence. I accept the opinion of Mr Parker in particular that the carrying out of demolition and site preparation operations on the Albion site was likely to disturb the contaminants within that site, including PCE, TCE and their degenerative products; and that such disturbance was likely to lead to migration of those contaminants through the pathway of groundwater to neighbouring land, unless specific measures were taken to prevent such migration. I find, on uncontroverted evidence, that the presence of these compounds in land has the potential to create a risk to human health and, in particular, that their presence in soil and groundwater beneath the Esso site represents at least a theoretical risk to human health. I accordingly hold that the operations carried out on the Albion site are properly to be categorised as inherently hazardous operations as that expression is used in Scots law. It follows that, in my opinion, the first defenders are not relieved of potential liability for damage to the pursuer’s land caused by negligence or nuisance by virtue of having engaged the third defender as an independent contractor and having instructed it to take appropriate and adequate precautionary measures.

B

C

Issue 2: Competence of contractors and design subcontractors

[37] The principal witnesses who gave evidence on behalf of either the first or the third to seventh defenders relevant to the competence of the third to seventh defenders and of Jacobs & Atkins as design subcontractors were: • Mr Graham Edmond, a chartered engineer who is currently head of construction for Transport Scotland. At the time of conclusion of the M74 Completion contract he was a project manager and head of the branch within Transport Scotland responsible, inter alia, for the M74.

• Mr Ian Bruce, a chartered engineer who was at the material time head of policy, planning and projects in Glasgow City Council. He was the engineer appointed by Glasgow City Council for the M74 Completion project and is now retired.

• Mr Stephen McFadden, a chartered engineer who was at the material time head of policy and design within land and environmental services at Glasgow City Council. He was the engineer’s representative for the M74 Completion project.

• Mr Matthew Lawman, an environmental consultant who was appointed by the third defenders as a consultant during the tender stage in 2007.

• Mr John Logan, who was at the material time employed by the seventh defenders as environmental manager for the M74 Completion project.

• Mr Alan Watt, chief executive of the Civil Engineering Contractors Association [CECA] Scotland.

The evidence given by these witnesses was not challenged by the pursuer.

Witness statements by Mr Lawman and Mr Logan were accepted as their evidence without the need for attendance at court.

D

E

F

Competence of the third to seventh defenders

[38] The M74 Completion was put out to tender as a “design and execution” project under the EU competitive dialogue procedure. First, expressions of interest were invited. Only one expression of interest was received, from the joint venture which is the third defender. The joint venture was invited to

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Esso Petroleum Co Ltd v Scottish Ministers (OH) 2016 S.C.L.R.

complete a pre-qualification questionnaire (PQQ) to allow the first defenders, through their agent Glasgow City Council, to assess its technical ability and financial standing. A technical assessment panel and a financial assessment panel were appointed comprising appropriate individuals from Transport Scotland and the three local authorities concerned. Mr Bruce chaired a joint meeting of assessment panels and an interview panel. In his opinion the panels comprised the individuals with the most relevant experience in Scotland.

[39] Stage 1 of the assessment process consisted of marking and assessing the PQQ information submitted by the parties to the proposed joint venture.

Stage 2 consisted of a previous performance assessment. The result was that the joint venture passed the pre-qualification assessment and was deemed to be a competent bidder. The competitive dialogue process then began, albeit that there was only one bidder. Because of that, Transport Scotland commissioned a shadow financial bid from EC Harris to allow the joint venture’s financial bid to be independently appraised. After successful completion of the competitive dialogue phase, a final tender was invited. Following submission of the tender, a final assessment process was carried out over a period of months and the contract was awarded on 4 March 2008.

[40] The four members of the joint venture are and at the material time were highly experienced in highway construction. All are members of CECA Scotland. All had in the past been, and continue to be, engaged in major road and bridge construction projects in Scotland. According to Mr Watt’s evidence, which I accept, they all know the Scottish transport infrastructure market very well, have long-established working relationships with Transport Scotland, and are likely contenders for major projects undertaken by Transport Scotland.

Mr Bruce described the joint venture partners as having a resilience and experience which “you would not get better from anyone else”.

[41] It was submitted on behalf of the pursuer that the court was not in a position to determine whether the first defenders had employed competent contractors, as the evidence consisted of the mere ipse dixit of the witnesses.

All that could be concluded was that the first defenders had purported to assess, amongst many criteria, the third defenders’ experience of dealing with contaminated land, in a situation in which there was no other bidder. The fact that the third to seventh defenders required to engage Jacobs & Atkins as design subcontractors in relation to mitigation of contamination on the Albion site might suggest that they did not themselves have the necessary competence in contamination issues.

[42] I reject this submission. I am entirely satisfied on the evidence before me that the third to seventh defenders were competent independent contractors for the purposes of the M74 Completion project. They are all substantial and long-established infrastructure contractors whose previous experience of comparable projects afforded a prima facie indication of their competence to be awarded this contract. The pre-qualification assessments carried out by the first defender and their managing agents were thorough and did not take the joint venturers’ competence for granted. Technical and financial assessments were carried out by individuals qualified to do so, and steps were taken specifically to address the fact that the joint venture was the only bidder. No evidence was led to suggest that the third defender and its members were not competent to undertake this project as an independent contractor. I reject in particular the submission that the appointment of a design subcontractor afforded an indication that the contractor in some way lacked competence in addressing issues such as contaminated land. It was clear from the employer’s requirements in the final tender issue that this issue would require to be investigated and

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appropriate protective measures taken. The construction contract provided expressly for the engagement of a specialist team of environmental consultants with responsibility for, inter alia, design of contamination mitigation works.

There is accordingly no merit in the submission. I am satisfied that there is ample evidence to entitle me to find that the third to seventh defenders were competent independent contractors.

A

Jacobs & Atkins

[43] In the light of what I have held elsewhere in this opinion, it is not clear to me whether any useful purpose is served by making a finding regarding the competence of Jacobs & Atkins as environmental design subcontractor, but I do so for what it is worth. Mr Bruce described Jacobs & Atkins as “the biggest and best in the UK”; Mr McFadden expressed a similar view. Mr Watt described them as two household names in relation to highway works who were very experienced and had a good reputation in Scotland, the UK and overseas for major projects. There was no contrary evidence. I am satisfied that Jacobs & Atkins were competent design subcontractors as regards contaminated land pollution mitigation.

B

C

Issue 3: Occupation and control of the Albion site

[44] As noted earlier, a certificate of completion of the M74 Completion contract was issued on 7 July 2011. Statutory responsibility for maintenance of the motorway now rests upon the first defenders in terms of s.2 of the Roads (Scotland) Act 1984. However, cl.49 of the conditions of the construction contract provided for a five-year period of maintenance after completion during which the third defender is obliged to execute: “… all work of routine maintenance and compliance surveys as described in the Contract and all work of repair amendment reconstruction rectification and making good of defects imperfections shrinkages or other faults”.

The third defender is entitled to be paid for such work unless, in the opinion of the engineer, it is necessitated by use of materials or workmanship not in accordance with the contract or neglect or failure of the contractor to comply with any repair, etc, obligation under the contract. Clause 61 provides that on expiry of the maintenance period, the engineer must issue to the first defenders (with a copy to the third defender) a maintenance certificate stating the date on which the third defender has completed its obligations to design, construct, complete and maintain the works to the engineer’s satisfaction. A maintenance certificate has not yet been issued. Issue of the maintenance certificate will not however relieve the first or third defenders of any liability of one to the other arising out of their respective obligations under the contract. The third to seventh defenders entered into a lease with the first defenders of, inter alia, the Albion site for the purpose of exercising the third defender’s rights and implementing its obligations under the contract. The lease was for the period from 1 May 2008 until final completion.

[45] The contract confers no express entitlement upon the third to seventh defenders to enter upon the first defenders’ property, except insofar as such entitlement may be implied from the obligation to execute works of routine maintenance. The procedure for obtaining access to fulfil obligations to maintain the landscape of the motorway or to rectify defects was described in evidence by Mr Roger Reid, a chartered civil engineer employed by the sixth defenders who is the senior manager responsible, on behalf of the joint venture,

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for the maintenance and defects correction period. In order to obtain access, the third defender requires permission from Transerve, which is Transport Scotland’s maintenance contractor for the motorway. Details of the proposed works must be provided in order to enable Transerve to assess whether they will affect traffic flow. Once the third defender has received an initial indication that the proposed works and access requirements are acceptable, a formal application is submitted. This process is followed no matter how minor the proposed works may be.

[46] On behalf of the first defenders it was submitted that if there are any defects in the system of treatment of contamination on the Albion site, the third defenders will require to rectify such defects. They will be in sole control of such remedial works and, in that sense—which is the only relevant sense— they will have control of the Albion site. They should be regarded as having occupation and control of the Albion site for the purpose of remediation of any continuing issue of contamination of the Esso site.

[47] I am not persuaded by this submission. The third to seventh defenders have no right of access to the Albion site without the express permission of the first defenders. It is, of course, in the interests of the first defenders to allow access in order for the third defender’s maintenance obligations to be implemented, although it should not be forgotten that a substantial part of what was the Albion site now consists of a motorway in constant use, and not merely of landscaped embankments. If, in due course, remedial work is found to be necessary within the Albion site to avoid continuing damage to neighbouring land caused by the fault of the third defender, then it may equally be in the first defenders’ interest to allow access to at least part of what was the Albion site in order for such remedial work to be carried out by or at the expense of the third to seventh defenders. In that eventuality, it may be that some or all of these defenders would be given occupation and control of part of the Albion site, although one can envisage alternative courses of action whereby occupation and control is given to another contractor engaged to effect any necessary remedial work. It will be recalled that the issue that is before me for determination is “whether the [Albion site] remains under the occupation and control of the third to seventh defenders” (my emphasis).

Having regard to the very restricted availability of access to any part of the Albion site, let alone to that part which now consists of motorway, it is clear to me that the question contained in the issue must be answered in the negative.

Disposal

[48] In accordance with parties’ request, I shall put the case out by order for discussion of further procedure in the light of my determination of these three issues. All questions of expenses are reserved.

F

For the pursuer: Martin QC, Burnet, instructed by McLay Murray & Spens LLP, Solicitors, Edinburgh.

For the first defenders: Sheldon QC, instructed by Anderson Strathern LLP, Solicitors, Edinburgh.

For the third to seventh defenders: Jones, Solicitor Advocate, MacPherson, instructed by bto, Solicitors, Edinburgh.

G

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A COURT OF SESSION

24 May 2016

Inner House (Extra Division) Lady Paton, Lord Drummond Young and Lord McGhie KR

Appellant

B

against STIRLING COUNCIL

Respondent

Parent and child—Permanence Order—Authority to adopt— Conditions for granting order—Order in which conditions should be considered—Threshold test—Whether threshold test satisfied— Adoption and Children (Scotland) Act 2007 (asp 4), s.84(5)(c)(ii) The grounds for dispensing with a parent’s consent to the making of an order granting authority for adoption, is set out in s.83(2) of the Adoption and Children (Scotland) Act 2007, which provides, inter alia: “(a) that the parent or guardian is dead, (b) that the parent or guardian cannot be found or is incapable of giving consent, (c) that subsection (3) or (4) applies, (d) that, where neither of these subsections applies, the welfare of the child otherwise requires consent to be dispensed with.”

Section 84 of the 2007 Act provides, inter alia: “(3) The court may not make a permanence order in respect of the child unless it considers that it would be better for the child that the order be made than it should not be made.

(4) In considering whether to make a permanence order and, if so, what provision the order should make, the court is to regard the need to safeguard and promote the welfare of the child throughout childhood, as the paramount consideration.

(5) Before making a permanence order: the court must— … (c) be satisfied that— (i) There is no person who has the right…to have the child living with the person or otherwise to regulate the child’s residence, or (ii) where there is such a person, the child’s residence with the person is or is likely to be, seriously detrimental to the welfare of the child.”

The respondent applied for a permanence order under s.80 of the Adoption and Children (Scotland) Act 2007 in respect of the child, CNRRR. The action proceeded to a proof before the sheriff following which a permanence order was made which vested a range of parental responsibilities and rights in the respondent. The sheriff also granted authority for adoption. The sheriff dispensed with the parental consent of the appellant and also that of J S, the father of the child, on the ground that they were unable satisfactorily to discharge their parental responsibilities or exercise their parental rights and were likely to continue to be unable to do so in terms of s.83 of the

C

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557

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2007 Act. The sheriff also ordered there should be only indirect “letterbox” contact.

The appellant appealed against the sheriff’s decision contending that the sheriff had failed to apply the critical test for the making of such an order, namely the test contained in s.84(5)(c)(ii). She also submitted that the facts as found by the sheriff were insufficient to satisfy the test, if properly interpreted, and that on the facts found the grounds for dispensing with parental consent under s.83(2) and (3) of the 2007 Act were not satisfied.

Concerns had been raised by social workers and others about a number of matters in relation to the child, including a relationship the mother had with a sex offender, sporadic attendance at nursery, concerns about his cleanliness and issues of safety in his house. His grandmother reported to social workers she had noted bruises on the child’s face and head, and when an appointment was arranged with the health visitor it was not kept. At the proof, the sheriff found as a fact that some of the injuries were non-accidental and were caused by a man with whom the mother had formed another relationship.

In due course, a child protection order was granted and the child was accommodated with foster carers and had remained in foster care. The sheriff found that the mother had consistently failed to engage with social workers, health professionals and other agencies who had tried to offer assistance with parenting the child and she had failed to follow advice about not associating with registered sex offenders. He held that the child was presently safe, settled and making progress in his placement with his current carers and that it would be seriously detrimental to the welfare of the child to be returned to the care of his mother or father. He made a number of findings in fact, namely that: it would be better for the child that a permanence order be made than that it should not be made; the child’s residence with the mother was likely to be detrimental to the welfare of the child; the child had been placed for adoption; the welfare of the child required the consent of the parents to the making of the order should be dispensed with; and the mother was unable satisfactorily to discharge her parental responsibilities or exercise her parental rights in relation to the child and was likely to continue to be unable to do so.

Counsel for the mother submitted that the sheriff had not addressed the threshold test as explained in particular in T W v Aberdeenshire Council as the test had not been addressed in the submissions for the local authority that the sheriff had adopted. He also contended that the sheriff erred in law in dispensing with her consent to placement for adoption in terms of s.83 of the 2007 Act. The sheriff had failed to consider the question of welfare in respect of the adoption in accordance with the principles set out in the authorities. In particular, the sheriff had not approached the adoption order as an order of last resort as suggested in the authorities. Nor had he taken into account the impact of art.8 of the European Convention on Human Rights and the concept of necessity. Counsel submitted that the sheriff had failed to carry out a global valuation of the options available for the child’s future upbringing in deciding which of those best met the duty to afford paramount consideration to the child’s welfare.

Held (1) that the challenge to the sheriff’s making of a permanence order had to fail, notwithstanding the error in his method of reaching that conclusion, and in particular his failure to address the threshold test (para.23); and (2) that the sheriff was justified in dispensing with the mother’s consent to the placing of the child for adoption, and he was fully entitled to reach the decision that the mother had been unable satisfactorily to discharge her parental responsibilities and rights and therefore the welfare of the child required that consent should have been dispensed with (para.27).

Observed that the threshold test was a matter of fundamental importance and, the court regretted the manner in which s.84 of the Adoption and Children (Scotland) Act 2007 was structured and that in that section the fundamental threshold provision came at the end, after the subsections dealing

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with the welfare of the child. It would have been clearly more sensible to have stated the threshold test at an earlier point, before the welfare provisions, because the threshold test had to be satisfied before any of the other provisions became relevant and as matters stood, there was an obvious risk that the sheriff would have failed to appreciate the fundamental importance of the criterion in subs.(5). That was what appeared to have happened in the instant case. The court was informed that subs.(5) had been added to s.84 at a very late stage in the parliamentary procedure, when it had become apparent that no criterion for dispensing with parental consent had been a specified and if that were so it clearly represented a serious error on the part of those responsible for determining the policy of the section and instructing parliamentary counsel and the result had been a very poor piece of draughtsmanship. For the future, any court in considering whether or not to impose a permanence order had to have regard to the fact that the test in subs.(5) was a threshold test, and that it had to be satisfied before the other provisions of s.84 became relevant (para.15); and appeal refused, notwithstanding the incorrect approach adopted by the sheriff to the threshold test under s.84 of the 2007 Act. Cases referred to: B (A Child), Re [2013] UKSC 33; [2013] 1 W.L.R. 1911; [2013] 3 All E.R. 929 B-S (Children) (Adoption Order: Leave to Oppose), Re [2013] EWCA Civ 1146; [2014] 1 W.L.R. 563 Fife Council, Applicants [2015] CSIH 74 K D (A Minor) (Ward: Termination of Access), Re [1988] A.C. 806; [1988] 2 W.L.R. 398; [1988] 1 All E.R. 577 S v L [2012] UKSC 30; 2013 S.C. (U.K.S.C.) 20; 2012 S.L.T. 961 S v City of Edinburgh Council [2012] CSIH 95; (I.H.) 2013 S.C.L.R. 534 T W v Aberdeenshire Council, [2012] CSIH 37; 2013 S.C. 108 Y C v United Kingdom (App No. 4547/10) [2012] 2 FLR 332; [2012] Fam. Law. 932.

A

B

C

D

The full circumstances of the case and the arguments of counsel are to be found in the following opinion of the court delivered by Lord Drummond Young on 24 May 2016.

LORD DRUMMOND YOUNG [1] The appellant is the mother of a child, CNRRR (referred to as the child), who was born on 26 April 2010. The respondent, Stirling Council, applied to the sheriff for a permanence order under s.80 of the Adoption and Children (Scotland) Act 2007 in respect of the child. The action proceeded to a proof before the sheriff, following which the sheriff made a permanence order. That order vested a range of parental responsibilities and rights in the respondent.

The sheriff also granted authority for adoption. In pronouncing the permanence order and granting authority for adoption, the sheriff dispensed with the parental consent of the appellant, and also that of J S, the father of the child, on the ground that they were unable satisfactorily to discharge their parental responsibilities or exercise their parental rights and were likely to continue to be unable to do so in terms of s.83 of the 2007 Act. The sheriff further ordered that there should be only indirect “letterbox” contact, without the exchange of photographs, between the child and the appellant, and granted authority for the child to be adopted in terms of s.83 of the 2007 Act. [2] The appellant has appealed against the sheriff’s decision. She contends that in making a permanence order the sheriff failed to apply the critical test

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for the making of such an order, that in s.84(5)(c)(ii) of the Adoption and Children (Scotland) Act 2007. Furthermore, she submits that the facts as found by the sheriff are insufficient to satisfy that test, if properly interpreted, and that on the facts found the grounds for dispensing with parental consent under s.83(2) and (3) of the 2007 Act are not satisfied. We propose to summarise the facts found by the sheriff; then to consider the requirements of the 2007 Act, in particular ss.83 and 84; and finally to consider the application of those requirements to the facts as found; for this purpose we have regard not merely to the sheriff’s formal findings in fact but to the other facts that appear from his judgment.

Facts

C

D

E

F

G

5304.indd 560

[3] The child’s father has had no involvement in the child’s life, as his relationship with the mother had ended before the child was born. The relationship involved physical abuse by the father towards the mother. The mother has contact with her own mother, but the two have a volatile relationship. On 5 August 2010 social workers raised concerns with the mother about contact that she had had with R K, a convicted sex offender; the mother maintained that she had been unaware that R K was a sex offender. On 21 February 2011 the child was placed on the child protection register as a result of concerns over nonengagement, sexual abuse, emotional abuse and neglect. At a meeting of professionals on 22 March, however, it was decided that there were insufficient grounds for a child protection case conference or for compulsory measures of care. The child began to attend a nursery in January 2011, but his attendance was sporadic and the nursery raised concerned about his cleanliness. Early in 2012 the child was enrolled at another nursery, which he attended on a regular basis.

[4] Throughout 2011 the child’s health visitor made 24 visits to address issues of safety in the house, safe storage of medicines, play, diet, nutrition, and issues of health and parenting. The health visitor had concerns about the child’s diet but described his care overall as being adequate. On 27 October 2011 the health visitor witnessed the mother handling the child roughly. On 16 February 2012 the health visitor prepared a report recommending that the child be placed on the child protection register. On 21 February the mother and grandmother attended an initial child protection case conference, but were asked to leave the meeting as a result of their behaviour. In May or June 2012 the mother formed a relationship with another man, D D, who had been released from prison on licence for violent offences. On 4 June the child’s grandmother alleged to social workers that the mother and D D had been drinking together and implied that this presented a potential risk to the child’s safety.

[5] On 20 June 2012 the grandmother reported to social workers that she had noted bruises on the child’s face and head. The health visitor arranged an appointment with the mother for later that day, but the mother failed to keep the appointment and claimed to have been visiting her father who had suffered a fit. The sheriff found as a fact that the mother deliberately avoided the health visitor to avoid the child’s injuries’ being reported to social workers. On the same day a child protection investigation was undertaken, in the course of which the mother gave a statement to a social worker and a police officer. The explanation that she gave for the child’s injuries was different from the one that she had given to the grandmother earlier in the day. The sheriff found as a fact that the mother gave inconsistent and contradictory explanations for the injuries on those occasions and that she gave yet another different explanation

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at the proof. The mother did not seek medical attention for the child following the discovery of those injuries. Nevertheless the child was examined by a consultant paediatrician on the same date. It was found that he had sustained numerous bruises to his forehead, cheeks, back, side, chest, thigh and knee.

The consultant was of opinion that the bruising on the child’s face and head was likely to be the result of blunt force trauma. The sheriff found as a fact that some of the injuries were non-accidental and were caused by D D. [6] On 21 June 2012 a child protection order was granted at Stirling Sheriff Court, and the child was accommodated with foster carers when he was discharged from hospital that day. He has remained with foster carers since then. The sheriff found that the mother has exercised contact on a regular basis, and her record of attendance at contact has been good. Contact has been of reasonable quality, although there have been difficulties as a result of the mother’s behaviour, which could be unpredictable and at times unsettling for the child. The child knew that the appellant was his mother. On 21 December 2012 grounds of referral were established at Stirling Sheriff Court on the basis of lack of parental care (Children (Scotland) Act 1995, s.52(2) (c)) and the mother’s relationship with a Sched.1 offender (1995 Act, s.52(2) (d)). A children’s hearing was held on 7 January 2013, when it was decided that matter should be reviewed after three months to assess whether rehabilitation to the mother’s care was in the child’s interests. A child protection case conference was held on 29 January, at which the mother indicated that she wished to resume the child’s full-time care. It was agreed that the potential for rehabilitation should be assessed over a three-month period, and it was anticipated that extensive work would be done with the mother by the social worker allocated to the child, to focus on perceived deficiencies in the mother’s ability to care for him. The social worker offered to refer the mother to a parenting group, and she indicated a willingness to cooperate. When a specific opportunity was offered, however, in February 2013, the offer was declined, apparently on the basis that the mother required to help her own mother to move house.

[7] During February 2013 concerns were raised, initially by the police, that the mother had resumed a relationship with R K. During March the child’s case was transferred to another social worker, who recommended that moves should be made towards a permanence order, with the child outwith the care of the mother. In April a decision was made at a review meeting to pursue permanence, although the newly allocated social worker was unaware of the child protection case conference that had taken place on 29 January and the failure of her predecessor to conduct the work identified at that case conference.

On 12 April 2013 the children’s hearing took place, as a result of which contact between the mother and the child was reduced from twice per week to once per week. In July 2013 a police report indicated that the mother was in a relationship with yet another registered sex offender, D L. The mother and D L have subsequently had a child born on 12 June 2014. That child was accommodated through a child protection order on his discharge from hospital following his birth. D L had been convicted of public indecency, lewd and libidinous practices and breach of the peace with a sexual element. At the date of the proof he and the mother were still in a relationship.

[8] Thereafter contact between the child and the mother was reduced, and since February 2014 has taken place once every six weeks. On 12 March 2014 the child moved to reside with prospective adopters, and he has remained in their care since that date. The sheriff found as a fact that the child is happy and settled with the prospective adoptive parents. He attends nursery. There

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B

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F

G

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are concerns about his behaviour before and after contact with the mother, and the prospective adopters do not believe that such contact is good for the child, although they would support indirect letterbox contact without photographs.

[9] The sheriff found that the mother has consistently failed to engage with social workers, health professionals and other agencies who had tried to offer assistance with parenting the child. She has failed to follow advice about not associating with registered sex offenders, and remains in a relationship with a registered sex offender who has been physically abusive towards her. The mother’s domestic circumstances since March 2013 are such, the sheriff found, that rehabilitation of the child to her care would not be conducive to the child’s welfare. There are no members of the child’s extended family appropriate to care for the child on a permanent basis. The child is presently safe, settled and making progress in his placement with his current carers. On that basis the sheriff found that it would be seriously detrimental to the welfare of the child to return him to the care of his mother or father.

[10] On the basis of the foregoing findings in fact, the sheriff made a number of findings in fact and law. So far as material, these are as follows: “[38] It would be better for the child that a permanence order is made than that it should not be made.

[39] The child’s residence with the (mother) is likely to be detrimental to the welfare of the child.

[40] The child has been placed for adoption.

[41] The welfare of the child requires that the consent of the parents to the making of the order be dispensed with.

[42] The (mother) is unable satisfactorily to discharge her parental responsibilities or exercise her parental rights in relation to the child and is likely to continue to be unable to do so.”

On that basis the sheriff made a permanence order and granted authority for the child to be adopted. In the order he dispensed with the consent of the mother and the natural father of the child, on the ground that they were unable satisfactorily to discharge their parental responsibilities or exercise their parental rights and were likely to continue to be unable to do so.

E

F

G

5304.indd 562

Legal requirements of the Adoption and Children (Scotland) Act 2007

[11] Permanence orders and the granting of authority to adopt as an aspect of such an order are dealt with in ss.80–84 of the Adoption and Children (Scotland) Act 2007. The effect of a permanence order, described in s.81 of the Act, is to vest in the local authority the responsibility of providing guidance to the child and the right to regulate the child’s residence: in essence, the basic responsibilities of a parent. In addition, s.80(2)(c) provides that, if the conditions set out in s.83 are met, such an order may grant authority for the child to be adopted. That has happened in the present case. Section 83 sets out the conditions applicable to the making of an order granting authority for adoption, but such an order is also subject to the important provisions of s.31 of the 2007 Act, which deal with dispensing with parental consent to such an order. Section 84 sets out the conditions applicable to the making of the permanence order itself. Both s.83, taken together with s.31, and s.84 are in issue in the present case. The fundamental issue, however, is whether the sheriff was entitled to make a permanence order, and it is accordingly convenient to begin by considering the provisions of s.84.

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563 A

Permanence orders: s.84

[12] Section 84 sets out conditions and considerations applicable to the making of a permanence order. Its material provisions are as follows: [His Lordship quoted the section as set out above and continued:] [13] Thus s.84 imposes two critical conditions if a permanence order is to be made in a case where the natural parent does not consent. First, in terms of subs.(3), the court must consider that it would be better for the child that the order should be made than that it should not be made; that decision must be made in the light of the requirement of subs.(4) that the welfare of the child throughout childhood is to be the paramount consideration. Secondly, in terms of subs.(5)(c)(ii), the court must be satisfied that the child’s residence with the parent is, or is likely to be, seriously detrimental to his or her welfare. Of the two conditions, that in subs.(5)(c)(ii) is the more fundamental: it imposes a threshold test, in the sense that, if it is not satisfied, the court is not permitted to dispense with the parent’s consent. It is only if the test is satisfied that the court requires to go on to consider the welfare of the child. This is apparent from the discussion of s.84 by Lord Bonomy in T W v Aberdeenshire Council at paras 12–13. In that case the court rejected an argument that the provisions of subss.(3) and (4), which deal with the welfare of the child, have a particular core status. Subsections (3), (4) and (5) imposed separate requirements, all of which had a bearing on whether a permanence order should be made.

Nevertheless: “One would generally expect the issue focused by subs.(5)(c)(ii) to have been addressed by the time subs.(3) comes to be considered. Indeed if the court is not satisfied that the requirement of (subs)(5)(c)(ii) is met, it is difficult to envisage circumstances in which the need to apply subs.(3) would arise. It is, therefore, difficult to envisage circumstances in which a court, faced with an application for a permanence order, would not first of all address the factors that arise under subs.(5)(c), in this case (5)(c)(ii), and any other matters arising under subs.(5), always bearing in mind the requirement of subs.(4) to regard the need to safeguard and promote the welfare of the child throughout childhood as the paramount consideration, and only then consider the application of the ‘no order principle’ in subs.

(3), again keeping subs.(4) in mind.”

That passage does not appear to have been cited to the sheriff in the present case, but it is clearly of fundamental importance to any application for a permanence order. The critical point is that the requirements of subs.(5) set a threshold test, and unless that test is satisfied no permanence order can be made and any further consideration of the other provisions of s.84 is irrelevant.

[14] The importance attached to the threshold test in subs.(5) in T W v Aberdeenshire Council is reflected in other decisions, notably the decision of the UK Supreme Court in the English case of Re B (a Child at para.29, per Lord Wilson and paras 177 et seq, per Lady Hale. The fundamental point is that depriving the parents of a child of their parental authority at common law is a most serious matter, and it should only be done if strict criteria are satisfied.

This is made clear in the speech of Lord Templeman in Re K D (A Minor) (Ward: Termination of Access) at p.812 (a passage cited by Lady Hale in Re B at para.179): “The best person to bring up a child is the natural parent. It matters not whether the parent is wise or foolish, rich or poor, educated or illiterate, provided the child’s moral and physical health are not endangered.” That is based on general common law principles, and provided that these are satisfied it is generally unnecessary to consider art.8 of the European Convention on Human Rights [ECHR]: see in particular Lord Neuberger at para.62 of Re B.

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[15] The threshold test is in our opinion a matter of fundamental importance, and we must express regret at the manner in which s.84 of the Adoption and Children (Scotland) Act 2007 is structured. In that section the fundamental threshold provision comes at the end, after the subsections dealing with the welfare of the child. It would clearly be more sensible to state the threshold test at an earlier point, before the welfare provisions, because the threshold test must be satisfied before any of the other provisions becomes relevant. As matters stand there is an obvious risk that the sheriff will fail to appreciate the fundamental importance of the criterion in subs.(5). That is what appears to have happened in the present case. We were informed that subs.(5) was added to s.84 at a very late stage in the parliamentary procedure, when it became apparent that no criterion for dispensing with parental consent had been specified. If that is so, it clearly represents a serious error on the part of those responsible for determining the policy of the section and instructing parliamentary counsel. The result is a very poor piece of draughtsmanship.

For the future, any court in considering whether or not to impose a permanence order must have regard to the fact that the test in subs.(5) is a threshold test, and that it must be satisfied before the other provisions of s.84 become relevant.

Authority for adoption: s.83

D

E

F

G

5304.indd 564

[16] Orders granting authority for adoption are dealt with in s.83 of the 2007 Act. Paragraphs (a) and (b) of s.83(1) require that the local authority should have requested that a permanence order include the grant of authority for adoption and that the court must be satisfied that the child has been or is likely to be placed for adoption. Section 83(1)(c) then deals with the question of parental consent to adoption. If such consent is not granted, the condition in s.83(1)(c)(ii) must be satisfied before the authority to adopt can be granted.

The latter provision authorises the court to dispense with the parent’s consent to the making of such an order on the grounds specified in subs.(2). Subsection (2) sets out a number of grounds, as follows: [His Lordship quoted the subsection as set out above and continued:] In the present case the provisions that are potentially relevant are para.(c) of subs.(2), taken together with subs.(3), or para.(d). Subsection (3) applies “if the parent or guardian…is, in the opinion of the court, unable satisfactorily to discharge” parental responsibilities and rights and is likely to continue to be unable to do so. Finally, s.83(1)(d) requires that the court should consider that it would be better for the child if it were to grant authority for adoption than if it were not to grant such authority.

[17] These provisions contain certain crucial tests. First of all, if the parents do not consent to adoption, such consent can only be dispensed with on the grounds set out in subs.(2) together with subss.(3) or (4). So far as relevant to the circumstances of the present case, these require one of two conclusions: either that the court should form the opinion that the parent is unable satisfactorily to discharge the responsibilities and exercise the rights of a parent, and is likely to continue to be unable to do so, thus satisfying the test in subs.

(3); or that the welfare of the child “requires” consent to be dispensed with, in accordance with subs.(2)(d). Secondly, the court must be satisfied, in terms of subs.(1)(d), that it would be better for the child that authority to adopt be granted then if such authority were not granted. The tests in subs.(2) are critical: unless one of them is satisfied the court cannot dispense with parental consent, and the question of the child’s welfare does not arise. It is only if the threshold test is satisfied that the welfare test embodied in subs.(1)(d) becomes

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material. The threshold test in subs.(3) is based on the capacity of the natural parent to discharge parental responsibilities and exercise parental rights.

[18] The corresponding tests in relation to s.31 are discussed at length by Lord Reed in S v L at paras 24–37, and the compatibility of the provision with rights under the ECHR is discussed at paras 38–49. For present purposes, it is worth emphasising that the threshold tests are to be construed strictly. Three passages in S v L are relevant. First (at para.33): “[T]he making of an adoption order against the wishes of a parent is a very serious intervention by the state in family relationships. It follows that the court will not lightly authorize such intervention. It did not require the Convention to teach us that.”

Secondly (at para.34): “It follows that legislation authorizing the severing of family ties between parents and their children will not readily be construed as setting anything less than a test of necessity… .There must…be an overriding requirement that the adoption proceed for the sake of the child’s welfare, which remains the paramount consideration. The court must be satisfied that the interference with the rights of the parents is proportionate: in other words, that nothing less than adoption will suffice.”

Thirdly (at para.40), quoting from the Strasbourg decision in Y C v United Kingdom: “[F]amily ties may only be severed in very exceptional circumstances and… everything must be done to preserve personal relations and, where appropriate, to ‘rebuild’ the family… .It is not enough to show that a child could be placed in a more beneficial environment for his upbringing… .

However, where the maintenance of family ties would harm the child’s health and development, a parent is not entitled under article 8 to insist that such ties be maintained … .”

A

B

C

D

Application of the legal requirements to the facts Permanence order

[19] The sheriff’s findings in fact and law are set out at para.10 above. So far as a permanence order is concerned, the critical findings are that: “[38] It would be better for the child that a permanence order is made than that it should not be made.

[39] The child’s residence with the respondent is likely to be detrimental to the welfare of the child.”

It is the second of these findings that appears to be intended to address the threshold test found in s.84(5)(c)(ii). It does not, however, address the strict criterion that that paragraph adopts, namely that the child’s residence with the natural parent “is, or is likely to be, seriously detrimental to the welfare of the child” (emphasis added). We have already emphasised the importance of this criterion. Mere detriment to the welfare of the child is not enough to satisfy the threshold test; serious detriment is required. While the question of serious detriment involves an evaluative exercise, largely dependent on the facts of the particular case, it is essential that the legal component in that exercise should be properly addressed. For that reason the court must consider whether there is serious detriment, and the sheriff does not appear to have addressed the issue in those terms. Furthermore, the threshold test appears to have been considered after the sheriff decided that the welfare test was satisfied (finding

5304.indd 565

E

F

G

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566 A

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38). In so doing, it seems likely that he was misled by the unfortunate structure of s.84. Nevertheless, if the welfare test is addressed before the threshold test, there is an obvious risk that the threshold test will be considered from the perspective of best interests rather than as a critical test in its own right. For these reasons we are of opinion that the sheriff was in error in the reasoning whereby he concluded that a permanence order should be granted.

[20] The result is that this court must itself give consideration to whether the threshold test in s.84(5)(c)(ii) is satisfied on the basis of the facts found by the sheriff and the other material accepted by him in his judgment. We have come to the conclusion that the threshold test is satisfied on that basis. In the first place, the sheriff expressly found (finding of fact at para.36) that: “(The mother’s) domestic circumstances since March 2013 are such that rehabilitation of the child to her care would not be (conducive) to the child’s welfare… .The child is presently safe, settled and making progress in his placement with his current carers. It would be seriously detrimental to the welfare of the child to return him to the care of his mother or father.”

We note that the expression “seriously detrimental” is made in that finding in fact, albeit that it is not repeated in the corresponding finding in fact and law.

There is a difference between the finding in fact and the statutory test, in that the finding in fact records that it would be seriously detrimental to the child’s welfare to return him to the care of his mother or father, whereas the statutory test is that the child’s residence with the relevant parent would be seriously detrimental to his welfare. Nevertheless, we consider that the substance of these two expressions is similar, and we accordingly consider that the finding in fact goes a considerable distance to acceptance that the statutory threshold test is met.

[21] Secondly, the sheriff (at para.117 of his judgment) expressly accepted the reasons put forward in argument by counsel for the local authority. These included the following (narrated by the sheriff at para.78): “It was submitted that the seriously detrimental test (s.84(5)(c)(ii) of the 2007 Act) was met. It was submitted that the evidence demonstrated that the child’s mother had issues of general hygiene, a lack of basic parenting skills and a volatile relationship with her own mother, had failed to engage with support agencies, had relationships with Sched.1 offenders (a reference to the sex offenders’ register) and was unable to protect the child from being assaulted whilst in her care. On 21 December 2012 grounds of referral were established in respect of the child on the basis that there was a lack of parental care in terms of s.52(2)(c) of the Children (Scotland) Act 1995 and the mother’s relationship with a Sched.1 offender in terms of s.52(2)(d) of the 1995 Act. It was also submitted there was evidence that the mother would not accept criticism or support from social workers, health professionals or other voluntary agencies such as Women’s Aid… .It was submitted that she had no insight into her own issues as a parent and she had no understanding of the risks posed by her association and relationships with registered sex offenders… .”

On the basis of the formal findings in fact made by the sheriff, which we have summarised at paras 3–9 above, we are satisfied that those conclusions were entirely justified. They involve very serious allegations, and if they are accepted it is inevitable in our view that the sheriff would have required to hold that residence with the mother would be, or would be likely to be, seriously detrimental to the child’s welfare.

[22] The finding in fact at para.36 must obviously be taken with the sheriff’s acceptance of the argument for the local authority. When that is done, we are

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of opinion that the test in s.84(5)(c)(ii) is satisfied. For the mother it was contended that the sheriff had not addressed the threshold test, as explained in particular in T W v Aberdeenshire Council, as the test had not been addressed in the submissions for the local authority that the sheriff had adopted.

Nevertheless, it appears to us that when the test is properly addressed it was inevitable that it was satisfied. On that basis the welfare test, as set out in subss.(3) and (4) of s.84, falls to be considered. On this matter the sheriff concluded, at finding in fact and law 39, that the child’s residence with the mother was likely to be detrimental to his welfare. We consider that that conclusion is clearly warranted by the evidence.

[23] For the foregoing reasons we are of opinion that the challenge to the sheriff’s making of a permanence order must fail, notwithstanding the error in his method of reaching that conclusion, and in particular his failure to address the threshold test.

A

B

Adoption

[24] The mother further contended that the sheriff erred in law in dispensing with her consent to placement for adoption in terms of s.83 of the 2007 Act. The sheriff held that the welfare of the child required that the consent of the parents to the making of an adoption order be dispensed with, and that the mother was unable satisfactorily to discharge her parental responsibilities or to exercise her parental rights, and was likely to continue to be unable to do so: findings in fact and law 41 and 42, set out at para.10 above.

[25] For the mother it was contended that the sheriff had failed to consider the question of welfare in respect of the adoption in accordance with the principles set out in S v L, and in the subsequent English decisions in Re B (A Child), and Re B-S (Children) (Adoption Order: Leave to Oppose); the latter case involves a detailed and helpful analysis by Munby P of the law relating to nonconsensual adoption. The latter approach had been approved in Scotland in Fife Council, Applicants, decided after the sheriff’s decision. In particular, it was said that the sheriff had not approached an adoption order as an order of last resort, as suggested in those cases. Furthermore, it was submitted that the sheriff had not properly taken into account the impact of art.8 of the ECHR and the concept of necessity: an adoption order should only be made without the parent’s consent if it is necessary rather than merely reasonable or desirable.

[26] In our opinion the sheriff was justified in dispensing with the mother’s consent to the placing of the child for adoption. The relevant test is that set out in s.83(3) of the 2007 Act, discussed above at paras 16–18. The critical finding that is required in every case is that the court should conclude that the parent is “unable satisfactorily to discharge” his or her parental responsibilities and rights and is likely to continue to be unable to do so. The sheriff addressed that question expressly in his findings in fact and law at para.42. On the basis of the evidence narrated in the findings in fact proper, supplemented by the arguments for the local authority which the sheriff expressly adopted, we are of opinion that that is a conclusion that he was fully entitled to reach. On this matter, the sheriff was entitled to rely on the same evidence as was relevant to the making of a permanence order under section 84: see S v City of Edinburgh Council at para.29, per Lady Paton. The result is that he was entitled to have regard to the totality of the evidence summarised at paras 3–9 above.

[27] For the appellant it was submitted that the sheriff had failed to carry out a global evaluation of the options available for the child’s future upbringing in deciding which of those best met the duty to afford paramount consideration to the child’s welfare: Fife Council at paras 63–64. In our opinion this criticism

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G

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is misplaced.The sheriff expressly found that the mother was unable satisfactorily to discharge her parental responsibilities or exercise her parental rights, on the basis of the history of her involvement with the child. Moreover, in the part of his judgment dealing with his decision, the sheriff stated (at para.120) that: “[M]y conclusion is that (the child’s) welfare would be best served by making a permanence order with authority to adopt. Accordingly, I am satisfied that the welfare of the child requires that the consent of the respondent should be dispensed with. In addition, I am satisfied that the respondent is unable satisfactorily to discharge her parental responsibilities or parental rights and is likely to continue to be unable to do so.”

Strictly speaking, as counsel for the mother pointed out, those issues are addressed in the wrong order; ability to discharge parental responsibilities and rights should be considered before the decision to make a permanence order with authority to adopt. Nevertheless, the substance of what the sheriff said is clear: the mother was unable satisfactorily to discharge her parental responsibilities and rights, and therefore the welfare of the child required that consent should be dispensed with. As we have indicated, on the facts found we consider that that is a conclusion that the sheriff was fully entitled to reach.

[28] The sheriff found at para.41 that the welfare of the child required that the consent of the parents to the making of the order should be dispensed with. That addresses the test in s.83(2)(d), but that section only becomes operative where neither subs.(3) nor subs.(4) applied. In the present case the sheriff concluded that subs.(3) was applicable, and consequently it was not necessary for him to go on to consider the application of the test in s.83(2)(d).

It was, however, accepted by both parties that, when a court makes a permanence order with authority to adopt in terms of s.84(3) of the Act, the court must reach the conclusion that such an order is necessary. That is apparent from the decision in S v L, at para.34 (quoted at para.18 above), where it is stated that any legislation that authorises the severing of family ties between parents and their children will not readily be construed as setting anything less than a test of necessity. Furthermore, in the 2007 Act, support for such a view can be found in s.14, where it is provided that, if an adoption order is to be made, the court must regard the need to safeguard and promote the welfare of the child throughout his or her life as the paramount consideration (subs.(3)), and any adoption agency must consider whether there is a better practical alternative to adoption (subss.(6) and (7)).

[29] We are nevertheless of opinion that the sheriff addressed the test of necessity. At para.41 of the findings in fact and law he held that the welfare of the child “required” that the consent of the parents be dispensed with, and at para.42 he held that the respondent was unable satisfactorily to discharge her parental responsibilities. Both of these findings in our view involve a test of necessity. Furthermore, we consider that a finding that adoption was necessary, and that no alternative was available, follows clearly from the findings in fact made by the sheriff. In this connection, we attach particular importance to the fact that the mother had had a series of relationships with registered sex offenders and men disposed to violence. We also consider it important that the appellant was unable to protect the child from injuries as a result of an assault by one of her partners. In respect of those injuries, she gave inconsistent explanations for the injuries to a social worker and the police and to the child’s grandmother, and during the proof the sheriff notes that she gave a further

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explanation that had not previously been given. The sheriff further found that, following the injuries suffered by the child, the mother deliberately avoided the health visitor to avoid a report to social workers, and following the discovery of the injuries she did not seek medical attention for the child. Finally, the child has been with the prospective adopters for a significant period and the sheriff finds that he is well settled with them. All of these factors point in our view very clearly to the conclusion that the test of necessity was satisfied.

Furthermore, no issue of proportionality arises on the basis of the facts found.

[30] It was further contended on behalf of the mother that the sheriff’s determination was incompatible with art.8, ECHR. In our opinion this argument must be rejected. It is clear from the discussion of the law in S v L, at para.35, that, provided that the test of necessity is met, there should be no contravention of Convention rights. While proportionality is also potentially relevant (para.37), if necessity can be demonstrated it is difficult to understand how proportionality can be an additional factor, except perhaps in an exceptional case. In the present case we consider that necessity is demonstrated on the basis of the sheriff’s findings in fact, and it has been held to exist by the sheriff, in his finding that the child’s welfare “requires” that consent should be dispensed with.

A

B

C

Contact

[31] The final issue raised by the mother is contact. In his findings in fact and law the sheriff held (para.44) that direct contact between the child and the mother would not safeguard or promote the child’s welfare. On that basis he restricted contact to indirect letterbox contact, without the exchange of photographs. In his findings in fact the sheriff notes that there had been concerns about the child’s behaviour before and after contact with his mother; he wets the bed and has nightmares. The prospective adopters did not believe that contact was good for the child. In his decision on this matter (para.121) the sheriff stated that he was satisfied that the evidence did not support the proposition that contact to date had been beneficial to the child. He further noted that, on the contrary, he accepted evidence that the child had been distressed before and after contact, and stated that he was satisfied that there was no benefit to the child in contact. On the basis of the findings in fact, we consider that the sheriff was fully entitled to make the foregoing findings. We accordingly conclude that there is no basis for interfering with the sheriff’s decision on the question of contact.

[32] For the mother it was argued that the denial of direct contact was incompatible with art.8, ECHR. It was submitted that the sheriff’s judgment did not disclose that he carried out any balancing exercise identifying the factors which clearly made the termination of contact necessary and justified in the paramount interests of the child. Furthermore he gave no proper explanation of why it was necessary that contact should cease. In our opinion the explanation given by the sheriff for the cessation of direct contact is adequate in the light of his findings in fact. In particular, the findings disclosed problems attendant upon direct contact, and also indicated the mother’s continuing association with registered sex offenders with a propensity to violence. In particular, the sheriff expressly stated that he accepted evidence that the child had been distressed before and after contact. He further referred to the prospective adopters’ opposition to contact, and held that he was satisfied that there was no benefit to the child in contact. Those findings are in our opinion sufficient to ensure compatibility with art.8.

5304.indd 569

D

E

F

G

09/11/16 12:39 PM

570 A

KR v Stirling Council (IH)

2016 S.C.L.R.

Conclusion

[33] For the foregoing reasons we will refuse the appeal, notwithstanding the incorrect approach adopted by the sheriff to the threshold test under s.84 of the 2007 Act.

B

For the appellant: Aitken, instructed by Balfour+Manson LLP, Solicitors, Edinburgh.

For the respondent: Sharpe, instructed by CMS Cameron McKenna, Solicitors, Edinburgh.

C

D

E

F

G

5304.indd 570

09/11/16 12:39 PM

A COURT OF SESSION

13 January 2016

Inner House (Extra Division) Lady Clark of Calton, Lord Malcolm and Lord McGhie EM

Pursuer (Appellant)

B

against AM

Defender (Respondent)

Parent and child—Contact—Parental rights and responsibilities— Appeal—Duties of appeal court—Sheriff principal altering decision upon facts—Whether entitled to do so—Apparent bias Section 1 of the Children (Scotland) Act 1995 provides: “Parental responsibilities

C

(1) Subject to section 3(1)(b) and (d) and (3) of this Act, a parent has in relation to his chid the responsibility— (a) to safeguard and promote the child’s health, development and welfare; (b) to provide, in a manner appropriate to the stage of development of the child— (i) direction; (ii) guidance; to the child; (c) if the child is not living with a parent, to maintain personal relations and direct contact with the child on a regular basis; and (d) to act as the child’s legal representative;, but only insofar as compliance with this Section is practicable and in the interests of the child.”

Section 2 of the 1995 Act provides, inter alia: “Parental rights

D

E

(1) Subject to section 3(1)(b) and (d) and (3) of this Act, a parent, in order to enable him to fulfil his parental responsibilities in relation to his child, has the right— (a) to have the child living with him or otherwise to regulate the child’s residence; (b) to control, direct on guide, in a manner appropriate to the stage of development of the child, the child’s upbringing; (c) if the child is not living with him, to maintain personal relations and direct contact with the child on a regular basis; and (d) to act as a child’s legal representative.

(2) Subject to Subsection (3) below, where two or more persons have parental right as respects a child, each of them may exercise that right without the consent of the other or, as the case may be, of any of the others, unless any decree or deed conferring the right, or regulating its exercise, otherwise provides.

(3) Without prejudice to any court order, no person shall be entitled to remove a child habitually resident in Scotland from, or to retain any such child outwith the United Kingdom without the consent of a person described in subsection (8) below … .”

F

G

571

5304.indd 571

09/11/16 12:39 PM

572 A

EM v AM (IH)

2016 S.C.L.R.

Section 11 of the 1995 Act provides, inter alia: “(7) Subject to subsection (8) below, in considering whether or not to make an order under subsection (1) above and what order to make, the court— (a) shall regard the welfare of the child concerned as its paramount consideration and shall not make any such order unless it considers that it would be better for the child that the order be made than that none should be made at all … .”

B

C

D

E

F

G

5304.indd 572

In an action concerning contact and whether a father should be deprived of his parental rights and responsibilities contact was refused by the sheriff who also deprived the defender of his parental rights and responsibilities. The defender appealed to the sheriff principal who allowed the appeal, found there should be supervised contact and suspended (rather than depriving) the defender’s parental rights and remitted the case to the sheriff “to decide the nature and extent of such an order, having carried out such investigations and obtaining such reports as he considers necessary, on the understanding that, at least in the first instance, contact will be under supervision”. In his decision the sheriff principal also made some new findings in fact.

The pursuer appealed to the Court of Session and the defender crossappealed in relation to the decision to suspend the parental rights and responsibilities. The appellant argued that the sheriff principal was not entitled to substitute his own judgment for the judgment of the sheriff, that he failed to take account of relevant considerations in doing so and in any event the effect of his decision and order was to remit to the sheriff to consider contact in a way which unlawfully fettered the sheriff’s judgment.

The defender opposed the appeal and submitted that the sheriff principal had applied the correct legal test in concluding that the sheriff must have exercised his discretion wrongly; took into account the correct considerations and did not fetter any new decision about contact. In the cross-appeal the defender submitted that the sheriff principal had erred in suspending his parental rights. He also claimed that the sheriff was not objectively impartial and should have recused himself.

Counsel for the pursuer argued that an appellate court was not entitled to interfere with a decision of a judge of first instance unless that exercise of judgment were wrong in the sense that it exceeded “the generous ambit within which reasonable disagreement was possible”. It was necessary for the sheriff to have been “plainly wrong” in the sense of “whether the decision under appeal was one that no reasonable judge could have reached”.

Counsel for the defender argued that the findings in fact of the sheriff did not justify his conclusions and his decision was plainly wrong. The sheriff principal was correct to conclude that there should be contact. The decision of the sheriff could not be relied upon and the sheriff had shown an apparent bias. He had apparently made up his mind that the defender’s parental rights should be removed before the second hearing.

Held (1) that the approach to be adopted by an appeal court set out by Lord Reed in Henderson v Foxworth Investments Ltd was relevant to welfare decisions in child care proceedings (para.29); (2) that the weight to be given to the relevant factors was primarily a matter for the sheriff and if the sheriff had taken into account all the relevant factors it would have been very difficult to conclude in a case such as the instant one that the decision had been one which no reasonable judge could have reached (para.31); (3) that the sheriff principal had not been entitled to have concluded that such a decision about contact had been one which no reasonable judge could have made (para.31); (4) that as the decision about contact was not supported by the court, the sheriff principal was not entitled to substitute suspension for deprivation of the defender’s parental rights and responsibilities (para.32); and

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573

(5) that the sheriff had not been obliged to give the parties an opportunity to make further submissions orally but he had been entitled to do so if he had considered it would have assisted him and the submission of apparent bias on behalf of the defender was entirely without merit (para.39); and appeal allowed and cross-appeal refused.

Observed that there had been some justification in the criticism made by counsel for the pursuer that the sheriff principal had not been entitled in the circumstances of the instant case to have referred the matter to a sheriff for a hearing which had been limited to further details of contact and had the sheriff principal been entitled to overturn the decision of the sheriff in relation to contact he should have referred the issue of contact to a sheriff to be reheard of new (para.33).

A

B

Cases referred to: B (A Child) (Care Proceedings: Threshold Criteria) [2013] UKSC 33; [2013] 1 W.L.R. 1911; [2013] 3 All E.R 929 G v G [1985] 1 W.L.R. 647; [1985] 2 All E.R. 225 Henderson v Foxworth Investments Ltd [2014] UKSC 41; (S.C.) 2014 S.C.L.R. 692; 2014 S.C. (U.K.S.C.) 203; 2014 S.L.T. 775 Hoekstra v HM Advocate (No.2), 2000 S.C.C.R. 367; 2000 J.C. 391; 2000 S.L.T. 605 Osborne v Matthan (No.2), (I.H.) 1998 S.C.L.R. 691; 1998 S.C. 682; 1998 S.L.T. 1264 Sanderson v McManus, (H.L.) 1997 S.C.L.R. 281; 1997 S.C. (H.L.) 55; 1997 S.L.T. 629 Thomas v Thomas, 1947 S.C. (H.L.) 45; 1948 S.L.T. 2.

The full circumstances of the case and the arguments of counsel are to be found in the following opinion of the court which was delivered by Lady Clark of Calton on 13 January 2016.

C

D

LADY CLARK OF CALTON Summary

[1] This appeal, and cross-appeal from the decision of the sheriff principal, relate to an action commenced in the sheriff court between the parents of a child in which the main dispute was whether the father should have contact with his child and to what extent, if any, he should be deprived of his parental rights and responsibilities.

E

History of court proceedings

[2] The pursuer and appellant (the pursuer) is the mother of K born June 2010. The defender and respondent (the defender) was in a relationship with the pursuer and they lived together for about two years until they separated in August 2010. The defender is the father of K and is so registered on the birth certificate of K. [3] In 2012, the pursuer raised an action seeking an order depriving the defender of all his parental rights and responsibilities in relation to K under s.11(2)(a) of the Children (Scotland) Act 1995 (the 1995 Act). The defender opposed such an order, defended the action and also sought a contact order in respect of K. The pursuer was successful in her application and the defender was refused contact by the sheriff as recorded in the sheriff’s interlocutor of 13 February 2014.

[4] The defender appealed to the sheriff principal. The sheriff principal allowed the appeal; recalled the interlocutor of the sheriff which he wrongly

5304.indd 573

F

G

09/11/16 12:39 PM

574 A

B

EM v AM (IH)

2016 S.C.L.R.

described as dated 13 April 2014; found that there should be contact (under supervision) by the defender to K as directed by the court and suspended (instead of depriving) the defender’s parental rights and responsibilities. The defender’s right to maintain personal relations and direct contact with K was suspended subject to such order as the court may make from time to time regarding contact. The sheriff principal remitted the cause to the sheriff: “[T]o decide the nature and extent of such an order, having carried out such investigations and obtaining such reports as he considers necessary, on the understanding that, at least in the first instance, contact will be under supervision.”

[5] The pursuer appealed to this court from the decision of the sheriff principal.

The defender opposed the appeal and sought to support the decision of the sheriff principal in relation to contact. The defender cross-appealed in relation to the decision to suspend the defender’s parental rights and responsibilities and sought a decision upholding the defender’s parental rights and responsibilities in relation to K.

C

D

E

F

G

5304.indd 574

The sheriff court proof and the judgment of the sheriff

[6] A proof was heard in Dumfries Sheriff Court on 23 April, 15 July and 7 October 2013. By agreement of the parties, the sheriff confined himself to the evidence heard on 23 April and 7 October 2013. In the pursuer’s proof, evidence was led from the pursuer, the pursuer’s mother (S M), and the pursuer’s aunt (M L). For the defender, evidence was led from the defender, the defender’s sister (F N) and the defender’s nephew (K L). The sheriff accepted the pursuer as a truthful witness and “discounted as untrue any claims made by the defender which were not accepted by the pursuer or were contradicted by her evidence” (para.113). He found the defender “to be a thoroughly dishonest witness—if indeed he had any concept of truth at all” (para.114). The sheriff found that no issues arose in relation to the credibility of the other witnesses (para.125).

[7] Having heard the evidence, the sheriff issued his judgment on 21 January 2014 with a draft interlocutor in respect of which he invited further submissions on behalf of parties. The sheriff made the following findings in fact: “1. The pursuer is E who resides in Scotland.

2. The defender is A M who resides in London.

3. The defender’s nationality is Ugandan.

4. The parties met in Manchester in or around 2007.

5. The defender and pursuer were in a cohabiting relationship between 2008 and 2010. They separated on 25 August 2010.

6. The pursuer and the defender are not registered as a married couple in the UK. 7. The ceremony known as Nikah was undertaken by the pursuer and defender. This ceremony forms part of an Islamic marriage. This form of Islamic marriage is not recognised in the UK. 8. There is one child of the relationship namely K, born…June 2010. The child’s sex is male.

9. The defender is registered on the birth certificate of K as the father.

10. The pursuer’s pregnancy with K was an unplanned pregnancy.

11. The defender was arrested on 25 August 2010 for breaches of immigration laws and was held on remand. While on remand, the pursuer visited the defender with K in prison on one occasion.

12. The defender has been convicted on two occasions in respect of breaches of immigration laws. On the…April 2011, he was convicted at…

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2016 S.C.L.R.

EM v AM (IH)

575

Crown Court for conspiracy to facilitate a breach of immigration law and sentenced to three years’ imprisonment. On…January 2012, he was convicted of conspiracy to breach the UK immigration laws and sentenced to 30 months.

13. Whilst in prison, the defender sent cheques to the pursuer in order to provide something to K’s upkeep.

14. Whilst in prison, the defender recorded a storybook for K which was sent to the pursuer in order for K to hear his father’s voice. The defender also sent a card to K. 15. The defender was released from prison on…August 2012, but was detained albeit at an Immigration Removal Centre by the UK Border Agency.

16. The parties moved together from Manchester to Scotland in August or September 2009 where they lived together until their separation in August 2010. During this period the defender frequently spent time away from the pursuer in England where he falsely told her he had a freight business.

17. In reality, he was engaged in the unlawful activity of arranging sham marriages in the UK, for which he was convicted and sentenced as recorded in finding in fact 12.

18. The pursuer knew the defender by the first name of D until she became aware at the time of his arrest for immigration offences in England his first name was A. 19. The defender told the pursuer that he was younger than he now claims to be. She believed he was born in 1980 whereas he claims to have been born in 1975.

20. The parties lived together in Scotland from after K’s birth until the defender was arrested in London on 25 August 2010. During this time, the defender assisted with K’s care.

21. The pursuer visited the defender on two occasions while he was in prison in late 2010. On the first occasion she took K with her to visit the defender. This was the last occasion the defender had direct contact with K. 22. K has extended family in London, including his aunt F N and nephew K L, both of whom would be supportive of the defender exercising contact with K in London.”

[8] Findings in fact 1–15 were made by the sheriff on the basis of facts agreed in a joint minute on behalf of the parties. On the basis of all the findings in fact and for the reasons explained in his note, the sheriff found in fact and law that: “It is not appropriate and not in K’s best interests that any contact order is made in favour of the defender… .” For the reasons set out in his judgment, the sheriff refused the defender’s application for a contact order.

[9] He explained that he saw little benefit to K in the defender continuing to exercise parental responsibilities and rights in relation to K at this stage in his life and allowed parties to consider his judgment and draft interlocutor and to make further representations. On 13 February 2014, the sheriff in a supplementary note to his judgment set out his further consideration of the issues in relation to the crave by the pursuer for deprivation of the defender’s parental responsibilities and rights. The sheriff stated: “14. I considered that a deprivation order did not terminate these responsibilities and rights for all time. It would do so for as long as the order was in force and may be reviewed at any time until K is 16 (actually as will be noted infra in relation to a particular parental responsibility only until he is 18).

15. The extent to which such order should be made was in my opinion a matter of debate at that stage. Mrs Guthrie raised the possibility of

5304.indd 575

A

B

C

D

E

F

G

09/11/16 12:39 PM

576 A

B

C

EM v AM (IH)

2016 S.C.L.R.

suspending any or all of these rights and responsibilities in her written submissions.

16. Having regard to the Lord President’s comments in T v T 2000 S.L.T. 1442 at paras.58 and 59 as to the making of a deprivation order, I appointed parties to be heard on the terms of the proposed final interlocutor, a draft of a possible order which I append to my judgment.

17. I had thus already decided in principle for the reasons in my judgment the court should restrict the defender’s parental responsibilities and rights; as Mr Hann correctly observed the purpose of the further hearing was to allow parties to make further submissions of the terms of the final interlocutor, as in T v T the practice of making a ‘blanket’ order was disapproved.

18. Mr Hann did not object to competency of an order suspending parental responsibilities and rights, a possibility mooted by Mrs Guthrie in her written submissions. This would be an unusual order, but a competent one. I considered it would be of benefit to the court to have the parties’ further submissions on this point.”

[10] For reasons which he set out in respect of each parental right and responsibility, the sheriff concluded that the defender be deprived of all parental responsibilities and rights in relation to K as set out in his interlocutor dated 13 February 2014.

The appeal by the defender to the sheriff principal

D

E

F

G

5304.indd 576

[11] There were 12 grounds of appeal advanced on behalf of the defender and the defender proposed 17 new findings in fact. The sheriff principal dealt with the appeal under the following heads: “(A) whether the sheriff erred in making finding in fact 18 (ground of appeal 1); (B) whether the sheriff erred in refusing to make a number of proposed findings in fact (ground of appeal 2); (C) the approach of the court to discretionary decisions by the sheriff; (D) the legal test for making a contact order and depriving a party of his or her parental rights and responsibilities (grounds of appeal 4, 5 and 6); (E) whether the sheriff erred in refusing to make a contact order (grounds of appeal 9, 11 and 12); (F) whether the sheriff erred in depriving the defender of all his parental rights and responsibilities (grounds of appeal 7, 8 and 10); (G) whether the findings in fact and law should be amended (ground of appeal 3)”.

The sheriff principal’s decision and the reasons which he gave for allowing the appeal are set out in his judgment of 10 December 2014.

[12] In relation to the findings in fact, the sheriff principal concluded that the sheriff erred in making finding in fact 18 and deleted the words “until she became aware at the time of his arrest for immigration offences in England his first name was A”. The sheriff principal refused to make the 17 new findings in fact proposed on behalf of the defender. He did however make some additional findings in fact. These were to the effect that the defender was pleased about the pregnancy; present at the birth of K; after the birth the defender was cooperative and helped the pursuer most of the time to look after K; and the defender interacted with K by playing and cuddling him and changing him. The sheriff principal also found that prior to the birth, the defender was home about half the time. The sheriff principal explained that these new additional findings in fact related to evidence given by the pursuer which the sheriff stated that he had accepted.

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2016 S.C.L.R.

EM v AM (IH)

577 A

The appeal and cross-appeal to this court

[13] The pursuer appealed the decision of the sheriff principal on the basis that the sheriff principal was not entitled to substitute his own judgment about contact and parental responsibilities and parental rights in substitution for the judgment of the sheriff, that he failed to take account of relevant considerations in doing so and in any event the effect of his decision and order was to remit to the sheriff to consider contact in a way which unlawfully fettered the sheriff’s judgment.

[14] The defender opposed the appeal and supported the decision of the sheriff principal in relation to his decision-making about contact; the sheriff principal applied the correct legal test in concluding that the sheriff must have exercised his discretion wrongly; took into account the correct considerations and did not fetter any new decision by the sheriff about contact. In the crossappeal the main issue raised was that the sheriff principal erred in his order suspending the respondent’s parental rights and responsibilities by failing to sustain the respondent’s second plea-in-law which stated: “The defender having a loving relationship towards the said child should not be deprived of parental rights.” The cross-appeal also challenged the decision of the sheriff as unreliable in various ways including, under citation of Hoekstra v HM Advocate (No.2), that the sheriff was not objectively impartial and should have recused himself.

B

C

Submissions by counsel for the pursuer

[15] Counsel adopted her written note of argument. The additional findings in fact made by the sheriff principal were not challenged by the pursuer but made no difference to the outcome. Under reference to the 1995 Act, counsel set out the statutory structure, in particular ss.1, 2, 3, 6 and 11. She drew attention to s.11(7)(D)(b) which directs the court, in considering making an order in relation to parental responsibilities and parental rights, to consider that: “(b) in pursuance of the order two or more relevant persons would have to cooperate with one another as respects matters affecting the child”.

The task for the sheriff was to consider and weigh all the relevant circumstances and apply the test in s.11(7)(a) which directs that the decision-maker have regard to the welfare of the child as its paramount consideration.

[16] Counsel submitted that an appellate court is not entitled to interfere with the decision of a judge of first instance unless that judge’s exercise of judgment is wrong in the sense that it exceeds “the generous ambit within which reasonable disagreement is possible”. The sheriff took advantage of seeing and hearing the witnesses and formed views about the witnesses including their credibility and reliability. The scrutiny by the sheriff principal of a transcript of the evidence could not replicate the advantages enjoyed by the sheriff. The sheriff principal was not entitled to embark upon his own balancing exercise, and because he reached a different conclusion from the sheriff, to conclude that he was entitled to overturn the sheriff. Counsel prayed in aid G v G; B (A Child) (Care Proceedings: Threshold Criteria), paras.38–42.

Counsel noted that in Henderson v Foxworth Investments Ltd, Lord Reed reviewed the authorities in paras.58–68 and cited B (A Child) with approval.

He identified the issue to be determined by the appeal court as whether the trial judge was “plainly wrong” in the sense of “whether the decision under appeal is one that no reasonable judge could have reached”. Reference was also made to Sanderson v McManus, Lord Hope, [p.284A–E;] pp.57H–58;

5304.indd 577

D

E

F

G

09/11/16 12:39 PM

578 A

B

C

D

E

F

G

5304.indd 578

EM v AM (IH)

2016 S.C.L.R.

and Osborne v Matthan (No.2), Lord President (Rodger), [pp.696G–697D;] pp.688H–689C. [17] Counsel noted that the sheriff principal founded on a short passage in Macphail on Sheriff Court Practice in support of his conclusion that the sheriff’s decision was vitiated by an error in weighing the relevant considerations.

The sheriff principal did not address the issue as to whether the sheriff’s determination was outside the generous ambit of reasonable disagreement or plainly wrong in the sense explained by Lord Reed in Henderson. Counsel submitted that it was not suggested that the sheriff had applied the wrong legal test. The sheriff carried out a balancing exercise and weighed factors both for and against contact and concluded that it was not in the best interests of K to make a contact order. Uncertainty over the defender’s immigration status was characterised as “an additional reason” by the sheriff. Counsel submitted that the sheriff principal in considering the reasoning of the sheriff in his note at para.26 made only partial reference to the considerations canvassed by the sheriff. The factors considered important by the sheriff principal such as the parent/child link, the child’s mixed ethnicity and the support provided by the defender to the child in the first few months of his life were all considered by the sheriff in the balancing exercise. The factors which weighed heavily with the sheriff such as the total untrustworthiness of the defender were factors which the sheriff was entitled to take into account.

[18] Counsel also submitted that the sheriff principal substituted suspension, instead of deprivation, of parental rights and responsibilities, but his reasons for that are not clear. His approach appeared to follow from his decision about contact. In any event it is not clear what the practical difference is in the context of this case where the period of suspension is not limited in time or tied to any particular event in the future.

[19] In relation to the cross-appeal by the defender that there was doubt as to whether an independent observer would view the sheriff’s judgment as reliable, counsel submitted that this was misconceived. The sheriff merely gave parties a further opportunity to address him in the light of his findings in fact and note about the issue of principle as to whether deprivation or suspension was appropriate.

Submissions by counsel for the defender

[20] Counsel adopted the written note of argument in respect of the crossappeal. But in the course of his oral submissions, he made it plain that the real issue of concern to the defender was contact. We understand that counsel considered there was no effective difference between suspension and deprivation, and he was content to focus and limit the disputed issues to contact and the parental right and responsibility relative to that.We understood that he did not seek to rely on the cross-appeal except insofar as relevant to these connected issues. He did not seek to insist that the defender should retain all the other parental rights and responsibilities. Counsel also sought to argue that in the event the sheriff principal’s decision was overturned, this court could not rely on the decision of the sheriff as it was wrong and unreliable.

[21] Counsel accepted the statutory structure and general principles of law as set out by counsel for the pursuer. He accepted that the sheriff principal was not entitled to interfere with the decision of the sheriff unless the sheriff was plainly wrong and submitted that the sheriff was plainly wrong in this case. He referred to the limited findings in fact made by the sheriff; the absence in the findings in fact of any findings pointing to the likelihood of the defender causing any harm to K; the positive findings in fact added by the sheriff

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579

principal such as the defender’s pleasure in the birth of K and the support given to the pursuer and K by the defender; the absence of findings in fact that the defender’s interest in K was manufactured because of his immigration status; and the irrelevance of the defender’s immigration status. The findings in fact of the sheriff did not justify his conclusions. In these circumstances, the sheriff principal was entitled to take into account the new findings in fact and to carry out a new balancing exercise as he considered that the sheriff had not done the balancing exercise properly and had given the wrong weight to important factors. In particular the sheriff had given too much weight to the criminal convictions of the defender.

[22] Counsel submitted that the sheriff principal was correct to conclude that there should in principle be contact, albeit under supervision, and that the details of that contact required to be considered and addressed in a hearing before the sheriff. He submitted that the sheriff principal was not attempting to restrict the discretion of the sheriff but merely setting out the parameters for reconsideration of the case. He accepted that any court considering the case would be bound by the statutory test in s.11(7)(a) of the 1995 Act and would require to have regard to the welfare of K as the paramount consideration.

[23] Counsel submitted that if the decision of the sheriff principal about contact was not upheld there was a problem because this court could not rely on the decision of the sheriff. For the reasons submitted the sheriff was wrong and unreliable in his approach and the case should be remitted to a new sheriff for a new hearing. Further the sheriff had shown an apparent bias. Counsel was critical of the two-stage approach adopted by the sheriff in relation to his draft interlocutor. He submitted that it was plain to a fair-minded and informed observer that there was a real possibility that the sheriff was biased. This was on the basis that the sheriff’s final interlocutor reflected his draft interlocutor thus the sheriff had, it would appear, made up his mind that the defender’s parental rights and responsibilities would be removed before the second hearing when parties were invited to make further submissions about parental rights.

A

B

C

D

The statutory framework under the 1995 Act

[24] [His Lordship quoted the sections as set out above and continued:] [25] Section 11 of the 1995 Act gives wide powers to the court to make orders in relation to parental responsibilities and parental rights.

Specific reference is made in s.11(2)(a) to an order depriving a person of some or all of his parental responsibilities or parental rights in relation to a child.

S.11(2)(d) refers to an order regulating the arrangement for maintaining personal relations and direct contact between a child and a person with whom the child is not living. This is commonly referred to as a contact order. Section 11(7) provides: [His Lordship quoted the section as set out above and continued:] Provision is also made for the taking into account of the child’s view. In this case, having regard to the age and maturity of K, it was not submitted that the sheriff required to have consideration to the views of the child.

E

F

Discussion The appeal

[26] In this case there was no dispute about the legal principles properly to be applied by the sheriff and the sheriff principal.

[27] We consider that it is important and useful to bear in mind the different functions carried out by the sheriff and the sheriff principal. The sheriff had the

5304.indd 579

G

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580 A

B

C

D

E

F

G

5304.indd 580

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2016 S.C.L.R.

task of making a decision about parental rights and responsibilities and contact within the framework of the 1995 Act. He heard disputed evidence from witnesses and formed important views about the pursuer and defender and their credibility and reliability which influenced his determination of the issues.

The sheriff made findings of fact based on the evidence in the case. In the appeal process we note that the sheriff principal had read the notes of evidence, but that exercise gave him none of the advantages which the sheriff who saw and heard the witnesses enjoyed. Although the sheriff principal chose to make additional findings in fact, we consider that these covered points of detail. We note, for example, that the sheriff acknowledged in finding in fact 20 that after K’s birth until the defender was arrested on 25 August 2010, the defender assisted with K’s care. In addition it is plain from the decision of the sheriff that he accepted the evidence of the pursuer on the basis of which the additional findings favourable to the defender were made by the sheriff principal. In our opinion there is nothing in the additional findings in fact made by the sheriff principal which would entitle the sheriff principal to interfere with the decision of the sheriff.

[28] We agree with the observations of Lord President (Rodger) in Osborne v Matthan (No.2) at [p.697A–C;] pp.688I–689B: “[I]t appears to me, however that the decision which a trial judge reaches on custody may perhaps be better described not as a matter of discretion but as a matter of judgment exercised on consideration of the relevant factors. The court must consider all the relevant circumstances and decide what the welfare of the child requires. Once the court has identified that, it has no discretion: the court must do what the welfare of the child requires.

Even though the decision may therefore not be truly one depending on the discretion of the judge, I none the less consider that counsel for the defender were right to acknowledge that, in a case like the present where the sheriff has seen and heard the witnesses, it would be unusual for an appeal court to interfere with the sheriff’s judgment on the issue of custody.

The sheriff will obviously have advantages which no scrutiny of the transcript of the evidence by an appeal court, however careful, can hope to replicate. That is a real factor of importance in this case where it is plain from the terms of his judgment that the sheriff formed certain views about the defender’s possible conduct on her return to Jamaica as a result of the impression which she made on him when she gave evidence in the witness box.”

[29] It is well settled that there are limitations to the circumstances in which the sheriff principal, acting as an appellate court, may interfere with the decision-making of the fact finder at first instance. In Thomas v Thomas, Lord Thankerton at p.54 said that in the absence of a misdirection, the appellate court should not come to a different conclusion on the evidence “unless it is satisfied that any advantage enjoyed by the trial judge by reason of having seen and heard the witnesses could not be sufficient to explain or justify the trial judge’s conclusion”. In a recent consideration of Thomas v Thomas and subsequent decisions, Lord Reed in Henderson v Foxworth Investments Ltd stated: “[66] These dicta are couched in different language, but they are to the same general effect, and assist in understanding what Lord Macmillian is likely to have intended when he said that the trial judge might be shown ‘otherwise to have gone plainly wrong’. Consistently with the approach adopted by Lord Thankerton in particular, the phrase can be understood as signifying that the decision of the trial judge cannot reasonably be explained or justified.

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581

[67] It follows that, in the absence of some other identifiable error, such as (without attempting an exhaustive account) a material error of law, or the making of a critical finding in fact which has no basis in the evidence, or a demonstrable misunderstanding of relevant evidence, or a demonstrable failure to consider relevant evidence, an appellate court will interfere with the findings of fact made by a trial judge only if it is satisfied that his decision cannot reasonably be explained or justified.

[68] The approach is consistent, as I have explained, with the Scottish authorities, and also with more recent authority in this court and in the Judicial Committee of the Privy Council (see, eg, Re B (A child) (Care Proceedings: Threshold Criteria), per Lord Neuberger, paras.52, 53) … .”

The approach set out by Lord Reed is, by implication, relevant to welfare decisions in child care proceedings.

[30] We turn now to consider the approach of the sheriff principal. In para.11, the sheriff principal described his task in this way: “at appeal I have to consider whether the sheriff erred in refusing to make a contact order. If I support the sheriff’s decision regarding contact, the separate issue then arises as to whether the sheriff erred in depriving the defender of all his parental rights and responsibilities …”.

The sheriff principal considered the matter further and in more detail under his heading (c) entitled, “The approach of the court to discretionary decisions by the sheriff.” He described the decision of the sheriff as discretionary. He appeared to accept that the sheriff had not erred in law, misapprehended the facts, considered any irrelevant matter, or left out of account any relevant matter. He considered whether the conclusion of the sheriff was vitiated by an error in weighing the relevant considerations by giving too little or too much weight to one or more of them. He stated: “I require, in considering this appeal, to adopt that approach to the balancing exercise that the sheriff carried out in light of the amended findings in fact.”

The sheriff principal then carried out his own balancing exercise applying the same statutory test which the sheriff applied under reference to s.11(7) of the 1995 Act. The sheriff principal concluded that the sheriff attached too little weight to the parent/child relationship and too much weight to the defender’s two convictions. He also concluded that there was no evidence to indicate that the defender would be other than a supportive father. He said that the sheriff proceeded solely on considerations such as “the defender is dishonest or a convicted criminal” (para.27).

[31] In our opinion this assessment by the sheriff principal does not fairly describe the reasoning of the sheriff. The sheriff acknowledged, in para.131, that there are a number of considerations in favour of contact by the defender with K. The sheriff considered that the environment of K with his mother was a secure and loving environment, and that the defender could not be trusted and that the pursuer did not trust him. The sheriff was concerned about disruption to K’s stability, security and continuity by contact with the defender.

That is against the background of the very young age of K, his stage of life, the absence of the defender since K was three months old and the sheriff’s assessment that the defender was not to be trusted. We consider that the weight to be given to the relevant factors was primarily a matter for the sheriff.

If the sheriff took into account all the relevant factors, in our opinion it would be very difficult to conclude, in the context of a case such as this, that the

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EM v AM (IH)

2016 S.C.L.R.

decision is one that no reasonable judge could have reached. We note that the sheriff principal did not consider the case by reference to such a test. In our opinion, the sheriff formed an impression of the pursuer and the defender and made an assessment of both of them which coloured his approach to the case and his conclusions. We consider that the sheriff was entitled to do that. The sheriff, having assessed the pursuer and defender, decided that contact with such a young child by the defender was in all the circumstances, at the time of his decision, not in the best interests of K. In our view the sheriff principal was not entitled to conclude that such a decision about contact was one which no reasonable judge could make.

[32] The sheriff principal did not give any reasons, separate from his conclusions about contact, for interfering with the decision by the sheriff to deprive the defender of his parental rights and responsibilities. We note that he accepted that the sheriff was entitled to conclude that the defender’s rights and responsibilities should not be left extant. He considered that the suspension order was justified by the principles in s.11 and the statutory test set out therein. As we do not support the sheriff principal’s decision about contact, we are not satisfied he was entitled to substitute suspension for deprivation of the defender’s parental rights and responsibilities.

[33] Although it is unnecessary for us to determine the matter, we consider that there is some justification in the criticism made by counsel for the pursuer that the sheriff principal was not entitled in the circumstances of this case to refer the matter to a sheriff for a hearing which was limited to further details of contact. We take into account that there had been a significant passage of time since evidence was heard and that, in the circumstances of this case, the practicalities of contact may be intertwined with the principle of contact. In our opinion had the sheriff principal been entitled to overturn the decision of the sheriff in relation to contact, he should have referred the issue of contact to a sheriff to be reheard of new.

The cross-appeal

E

F

G

5304.indd 582

[34] The scope of the cross-appeal was limited by counsel for the defender to focus on the parental rights and responsibilities associated with contact. The sheriff considered the parental responsibility and right of the defender to maintain personal relations and direct contact with the child on a regular basis in paras.39–43. In para.41 he stated: “[W]hen (K) is older and perhaps inquisitive about his roots, and the defender is perhaps deported from the United Kingdom, there may be the possibility of indirect contact, such as letters or Skype.

[42] But these were unknown factors at this stage and best addressed in the light of future circumstances. I consider the pursuer would be willing, from her evidence, to look at matters anew when K was older. Meantime I saw no benefit to K in preserving this parental responsibility and right of the defender.”

[35] We are of the opinion that the sheriff was entitled, for the reasons he gave, so to conclude at the time of his decision. We note however that a significant period of time has passed since the sheriff heard evidence in 2013. K is older and now at school. There is no information before this court about whether K understands some of his history and his father’s desire to maintain contact. We have no up-to-date information about the personal circumstances of the parties and K. The deprivation of the parental rights and responsibilities of the defender in this case is not to be compared with the deprivation of such rights

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EM v AM (IH)

583

and responsibilities in other cases where, for example, a third party obtains parental rights and responsibilities because a parent has caused significant harm to a child. The sheriff accepted that there were some positive benefits which K might obtain from contact with the defender. The deprivation of parental rights and responsibilities and refusal of contact was not intended to be permanent. He acknowledged that both contact and the issue of parental rights and responsibilities were subject to review by the court if, for example, there was a change of circumstances.

[36] We agree with the sheriff that the issue of contact may require to be re-addressed during the childhood of K and we note that a long period of time has passed since the decision of the sheriff. We have some concerns that the issue of deprivation of the parental right and responsibility relating to contact in this case, may deflect from the real issue in the case which we consider to be contact by the defender with K. We consider that parties in this case should not be deflected in the future from the issue of contact by diversionary arguments about whether the relevant parental right and responsibility should be restored to facilitate contact. We were not addressed by parties about the implications of s.11(3)(a)(b) of the 1995 Act which has been the source of some uncertainty in relation to the right of a parent, deprived of parental rights, to apply for a contact order. We understand that Scottish Ministers intend soon to finalise an order which will confirm such a right to apply for contact.

[37] It will be apparent from what we have said that we consider that there is no merit in the general submission by counsel for the defender that the decision of the sheriff is in some way unreliable. For the reasons we have explained, we accept that the decision of the sheriff on the findings made and for the reasons he gave was a decision which fell well within the band of reasonable decision-making.

[38] We consider it necessary however to deal specifically with the submission made by counsel for the defender that the sheriff’s decision displayed “apparent basis”. Counsel stated that he did not suggest that there was any actual bias on the part of the sheriff.

[39] We note that this was a case in which the issues to be determined by the sheriff included the issue raised by the pursuer as to whether the defender should be deprived of his parental rights and responsibilities. Obviously the sheriff required to apply his mind to that issue after he heard the evidence and submissions. No justifiable criticism could have been made if the sheriff had merely determined all the issues and issued his judgment and note. Instead, the sheriff gave both parties the opportunity to consider his findings in facts and his reasoning for concluding that there should be restriction of the defender’s parental responsibilities and rights and allowed parties to make further submissions as to whether the restriction should be by deprivation or suspension. The issue of suspension had been raised in written submissions.

We do not consider that the sheriff was obliged to give the parties such an opportunity to make further submissions orally, but he was entitled to do so if he considered that would assist him. The sheriff having heard further oral submissions then set out in a further note his reasons for deprivation rather than suspension of parental rights and responsibilities. We note that there was no objection made to the sheriff on behalf of the defender that the procedure adopted was unfair or that the sheriff should recuse himself. We are unable to find any reference to a submission of bias being made to the sheriff principal.

The case of Hoekstra cited on behalf of the defender is so far removed from the circumstances of the present case that we struggle to see its relevance. We are

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584 A

EM v AM (IH)

2016 S.C.L.R.

in no doubt that this submission on behalf of the defender is entirely without merit.

Decision

B

[39] In disposing of this case, we allow the appeal by the pursuer. We recall the interlocutor of the sheriff principal dated 10 December 2014, affirm the interlocutor of the sheriff dated 13 February 2014 and refuse the cross-appeal by the defender and respondent.

[40] Both parties, having the benefit of legal aid, were agreed that no award of expenses shall be made due or by either party and this will be reflected in our interlocutor.

For the pursuer: Scott QC, Wild, instructed by Digby Brown LLP, Solicitors, Edinburgh.

For the defender: Hadjucki QC, Ardrey, instructed by Allan McDougall, Solicitors, Edinburgh, for Hann & Co, Solicitors, Annan.

C

D

E

F

G

5304.indd 584

09/11/16 12:39 PM

A COURT OF SESSION

27 January 2016

Inner House (Extra Division) Lady Dorrian, Lord Drummond Young and Lord Malcolm McSPARRAN McCORMICK

Appellants

B

Solicitors—Professional misconduct—Complaint by firm of solicitors against solicitor dismissed as “totally without merit”—Whether complaint totally without merit—Legal Profession and Legal Aid (Scotland) Act 2007 (asp 5), s.7 Words—”Totally without merit” Section 21(4) of the Legal Profession and Legal Aid (Scotland) Act 2007, provides, inter alia, the grounds upon which an appeal against the decision of the Scottish Legal Complaints Commission may be based: “(a) that the Commission’s decision was based on an error of law; (b) that there had been a procedural impropriety in the conduct of any hearing by the Commission on the complaint; (c) that the Commission has acted irrationally in the exercise of its discretion; (d) that the Commission’s decision was not supported by the facts found to be established by the Commission.”

The appellants were a firm of solicitors who complained to the Scottish Legal Complaints Commission about the conduct of another solicitor alleging that the solicitor wrote letters to the appellants, to another firm of solicitors and to a firm of chartered accountants in which it was falsely asserted that the appellants had conspired with a chartered accountant and others to commit fraud and indeed did commit fraud.The Scottish Legal Complaints Commission concluded that the complaint was totally without merit in terms of s.2(4) of the 2007 Act and accordingly the complaint was ruled ineligible and not referred to the relevant professional organisation, namely the Law Society of Scotland.

The issue arose in connection with the affairs of a deceased client of the appellants. The estate of the client had been wound up on the basis of intestacy in accordance with a deed of variation agreed by his four children. In 2014 the appellants received a letter, dated 5 March, from the solicitor acting for one of the deceased’s sons and a former cohabitee. The letter referred to a will of the deceased signed in 1990 and claimed that a copy of the will had been given to a chartered accountant at the meeting at which the deed of variation had been signed. The letter averred that the deed of variation was a fraud and that the former cohabitee had been cheated of her rights under the will. The letter went on to say: “It may be that our clients are misinformed or that there is a genuine and legal explanation or reason. If this is the case please provide it as soon as possible.” The same solicitor also wrote a letter to another firm of solicitors who acted for another member of the family in which it was alleged that the deed of variation appeared to be evidence of fraud on the part of those who benefited from the deed and that it raised questions about the actions of the law firm involved. A third letter was sent to the deceased’s chartered accountant also alleging fraud.

The appellants averred that at the time of the 1990 will the cohabitee was living with the deceased but that relationship subsequently foundered and the

C

D

E

F

G

585

5304.indd 585

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586 A

B

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E

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5304.indd 586

McSparran McCormick, Appellants (IH)

2016 S.C.L.R.

cohabitee married another person. As a result in about December 1997 the deceased contacted the appellants to make further testamentary arrangements and he instructed the appellants to destroy the 1990 will and give instructions for preparation of a new will. In accordance with these instructions the old will was destroyed and the new will prepared and sent to the deceased who kept it with his papers but did not sign it. He contacted the appellants shortly before his death to review his will and they read over to him the terms of the 1997 will, but failed to notice that it had not been signed, with the result that he died intestate. The appellants also averred that before the solicitor had written a letter of complaint in similar terms to the Institute of Chartered Accountants of Scotland, they had informed the solicitor of that fact.

The appellants complained to the Scottish Legal Complaints Commission on the basis that there had been no contact made to them prior to the letters being written and no attempt to obtain information from them and the allegations were made without properly checking the facts, recklessly, and without proper belief in the truth.

The Commission treated the complaint as restricted to the contents of the letters of 5 March and noted that there was no suggestion that the letters were sent other than in accordance with their client’s instructions; that the factual assertions were based on anything other than the version of events provided by the clients and that the letters were seeking information and comment from the recipients. It dismissed the complaint as being totally without merit.

The appellants appealed to the Court of Session under s.21 of the 2007 Act and contended first, that the Commission acted erroneously in seeking to follow the guidance in Law Society of Scotland v The Scottish Legal Complaints Commission; and secondly, that it erred in considering only the terms of the letters of 5 March and that in any event its determination was not supported by the facts. Counsel for the appellants submitted that although the reasoning in the case was accepted as a generality it was not apt to cover a situation which involved imputations of fraud or dishonesty, particularly against a professional person. There was an important distinction between an assertion of primary fact and an assertion of inference drawn from primary fact. Unbridled, intemperate or abusive language and the offensive and unprofessional tone of certain letters was sufficient to amount to misconduct. Solicitors were obliged to take particular care to identify the basis underlying accusations of dishonesty, and to refrain from making such accusations unless a proper basis for them existed. The Commission’s view that the fact that a solicitor acted upon a client’s instructions rendered the solicitor immune to disciplinary sanction in respect of his correspondence was an unwarranted gloss on the decision in Law Society of Scotland v Scottish Legal Complaints Commission.

Counsel for the respondent submitted that the Commission was entitled to treat the terms of the complaint as restricted to the letters of 5 March and to dismiss the complaint as being totally without merit. In writing the letters on clients’ instructions the solicitor did not warrant, or have responsibility for, the accuracy of what he had been told. He had no duty to carry out an independent investigation as to its truth. The respondent’s duty was restricted to considering the complaint actually made. The respondent had no duty to attempt to resolve any material dispute of fact bearing upon the complaint. Although the complaint was capable of covering the subsequent letters, the Commission could reasonably have read it as being restricted to the letters of 5 March.

Held (1) (per Lady Dorrian) that in proceeding on the basis that whether the allegations contained in the letter were true or false was irrelevant so long as the allegations had been made on the instructions of the client and had not been based on anything other than “the version of events provided by the client” and in considering that even if the allegations turned out to have been unfounded the solicitor had been entitled to make the allegations “provided he had information to support the allegations” and that in the instant case the solicitor had had such information namely “his client’s instructions, witnesses

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McSparran McCormick, Appellants (IH)

587

to the handing over the will to Mr O’Hara of the accountancy firm”, the Commission had erred in law; its decision had not been supported by the facts and had been irrational and if the Commission’s determination was to have been read as proceeding on the basis that the letters had not asserted fraud on the part of the complainers that was a further error (para.33); (2) that the Commission had erred in considering that the observations in Law Society of Scotland v Scottish Legal Complaints Commission in relation to assertions of primary fact have equal validity in relation to inferences of fact or law and in regard to imputations of dishonesty it was not enough to entitle a solicitor to write letters of the type in the instant case that his client had said “on these facts I have said I was cheated” and the solicitor must have been able to have concluded that a reasonable interpretation of the facts would be to have drawn an inference of dishonesty and insofar as the Commission’s decision had proceeded on the basis that the solicitor would have been entitled to have made an assertion in correspondence, so long as it had been made on the instructions of his client, that was an error in law (para.35); (3) that the decision was vitiated as having been reached on the basis of errors in law and being in certain respects unsupported by the facts found to be established by the Commission and the Commission’s decision was irrational in the sense that it was not one which a body such as the Commission might have reasonably made (para.43); and (4) that the Commission’s function was to sift complaints, not to determine them and if the complaint was remitted the latter task fell to the Law Society which conducted its own investigations of the case and it was that society which was the body best placed to evaluate whether a solicitor had been guilty of professional misconduct or unsatisfactory professional conduct and the threshold for remitting complaints to the Law Society was relatively low and the test for rejection of a complaint as totally without merit was that it would not be open to the Law Society to conclude that the conduct complained of amounted to professional misconduct or unsatisfactory professional conduct (paras 43, (Lady Dorrian), 46 (Lord Drummond Young) and 59 (Lord Malcolm)); and appeal upheld and the matter remitted to the Commission to proceed as accords.

Law Society of Scotland v Scottish Legal Complaints Commission, [2010] CSIH 79; (I.H.) 2010 S.C.L.R. 781; 2011 S.C. 94; 2011 S.L.T. 31 explained and distinguished.

A

B

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D

Cases referred to: Grant Estates plc v Royal Bank of Scotland plc [2012] CSOH 133 Law Society of Scotland v The Scottish Legal Complaints Commission [2010] CSIH 79; (I.H.) 2010 S.C.L.R. 781; 2011 S.C. 94; 2011 S.L.T. 31 Saville-Smith v Scottish Legal Complaints Commission [2012] CSIH 99 Sharp v Council of the Law Society of Scotland, 1984 S.C. 129; 1984 S.L.T. 313.

5304.indd 587

E

On 27 January 2016 the following opinions were delivered. The full circumstances of the case and the arguments of counsel are to be found in the opinion of Lady Dorrian.

F

LADY DORRIAN [1] The appellants are a firm of solicitors who complained to the Scottish Legal Complaints Commission about the conduct of another solicitor, Mr John McGeechan of JBM Solicitors, Airdrie. In essence, the complaint alleged that Mr McGeechan wrote letters to the appellants, to another firm of solicitors and to a firm of chartered accountants in which it was falsely asserted that the appellants had conspired with a chartered accountant and others to commit fraud, and did indeed commit fraud. The precise nature of the complaint will

G

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McSparran McCormick, Appellants (IH)

2016 S.C.L.R.

be discussed below. The Scottish Legal Complaints Commission concluded that the complaint was totally without merit in terms of s.2(4) of the Legal Profession and Legal Aid (Scotland) Act 2007 (the 2007 Act). Accordingly, the complaint was ruled ineligible, and accordingly not referred to the relevant professional organisation, namely the Law Society of Scotland.

Background

B

C

D

[2] The issue arose in connection with the affairs of a deceased client of the appellants, as explained in the Scottish Legal Complaints Commission determination paras 1.1–1.10. The appellants had acted for Mr Leslie Wilmot who died in March 2008. His estate was wound up on the basis of intestacy in accordance with a deed of variation agreed by his four children, one of whom was a Justin Wilmot. Justin Wilmot was the son of the deceased and a former cohabitee, Caroline Callaghan. The appellants wound up the estate.

[3] In March 2014 they received a letter, dated 5 March, from Mr McGeechan acting for both Justin Wilmot and Caroline Callaghan. The letter was headed “Action for reduction of deed of variation”. It referred to a will of the deceased from 1990, and claimed that at a meeting at which the deed of variation was signed, and at which a solicitor from the complainer’s firm was present, Justin Wilmot had given a copy of the 1990 will to Mr O’Hara, who ignored it. The letter stated: “The will of Leslie Wilmot was prepared by your firm and appears to be properly executed. Your firm would, therefore, be aware of the existence of the will whilst acting in the deed of variation.

“It appears that the deed of variation was a fraud that resulted in Caroline Callaghan being cheated of her rights under the will …

“We are instructed to raise an action of reduction and to seek damages against all parties involved. We are also instructed to lodge complaints with various professional bodies, the police and HMRC.” The letter continues: “It may be that our clients are misinformed or that there is a genuine and legal explanation or reason. If this is the case please provide it as soon as possible.”

E

[4] In a letter sent the same day to Messrs Clark Boyle, Solicitors, who acted for another member of the family, Mr McGeechan stated that: “The solicitors who prepared the will and the deed of variation, the accountants and your client were aware of the existence of the will.”

It asserted that the deed of variation: “[A]ppears…to be evidence of fraud on the part of those who benefited from the deed significantly and it raises questions about the actions of the law firm… involved.”

F

G

5304.indd 588

It concludes by stating: “We are further instructed to lodge formal complaints with the professional bodies regarding the firm of solicitors and the accountant and will be lodging a formal complaint with HMRC and the police about the deliberate undervaluing of the estate and the theft of moveable items from the estate… .We would be interested to know if your client can assist us as a witness in what will be a larger action regarding the deed of variation and the will, in order that we can correct the fraudulent distribution of the estate of Leslie Wilmot.”

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2016 S.C.L.R.

McSparran McCormick, Appellants (IH)

589

It is apparent from this letter that Caroline Callaghan was claiming to have been married to the deceased at the time of his death.

[5] A third letter was sent to the deceased’s chartered accountant, Mr O’Hara, in which it was stated that; “… Caroline Callaghan has been cheated out of her rights under the will and that a fairly substantial fraud has been committed”.

[6] That letter also indicated that complaints would be lodged with professional bodies, the police and HMRC. [7] The appellants received a further letter from Mr McGeechan dated 24 March 2014 in which, after referring to the 1990 will, he stated: “Your firm also thereafter acted for various parties in a deed of variation which clearly contradicts the will and which stated in para.1 that Leslie Wilmot died intestate. He obviously did not die intestate and your firm would have had to be aware of that, having drafted and attended to the execution of his will.”

He added that Justin Wilmot: “was deceived into signing the deed of variation when a solicitor from your office was present…The deed of variation would therefore appear to be a fraudulent document by claiming that Leslie Wilmot died intestate”.

[8] On the same date a further letter was also sent to the chartered accountants in terms which stated: “We also note that you refer to another will and that this appears to have been unsigned. This may be viewed as a convenient and manufactured document that was created by various parties who were not happy about the will of Leslie Wilmot. We are concerned to note that the solicitors who acted in the original will and the deed are the same firm. It seems very strange that there was no reference to the validly executed will and we note that Caroline Callaghan, who was a beneficiary in that will, is not a signatory to the deed. This therefore makes the deed invalid and the whole circumstances give the impression of a deliberate fraud.”

That letter also states, “we hold a valid signed and executed will” a claim which the appellant asserts is false, Mr McGeechan having had sight only of a copy will.

[9] A letter of 24 April was written to the Institute of Chartered Accountants of Scotland intimating a complaint against Mr O’Hara. In that letter it was asserted that: “through a combination of actings of McSparran McCormack…he (Justin Wilmot) was deceived into signing a deed of variation.”

[10] In a final letter, dated 7 May and sent to Mr Ian Anderson, solicitor, by then acting for the appellants, Mr McGeechan stated: “There appears to be collusion between professional parties and other members of the family.”

[11] The appellants aver that at the time of the 1990 will the deceased was cohabiting with Caroline Callaghan who was named as a beneficiary in the will. That relationship foundered in acrimonious circumstances in 1994, apparently in consequence of Caroline Callaghan commencing a relationship with a friend of the deceased, one Benjamin Biddle whom she married in 1999. In about December 1997 the deceased contacted the appellants to make further testamentary arrangements. He considered that the provision for Caroline Callaghan was no longer appropriate, and that provision should be

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590 A

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5304.indd 590

McSparran McCormick, Appellants (IH)

2016 S.C.L.R.

made for Justin Wilmot who had not been born until after the execution of the 1990 will. Accordingly, on 18 December 1997 he instructed the appellants to destroy the 1990 will and gave instructions for preparation of a new will. In accordance with those instructions the old will was destroyed and a new will prepared and sent to the deceased who kept it with his papers but did not sign it. He contacted the appellants shortly before his death to review his will. They read over to him the terms of the 1997 will, but failed to notice that it had not been signed, with the result that he died intestate.

[12] The appellants further aver that prior to the letter of 24 April 2014 they had informed Mr McGeechan: (i) that Caroline Callaghan had never been married to the deceased; (ii) that at the time of the death she was in fact married to someone else; and (iii) that the 1990 will had been destroyed animo revocandi.

[13]The appellants complained to the Scottish Legal Complaints Commission on the basis that Mr McGeechan may have been guilty of professional misconduct, or at least unsatisfactory professional conduct, by making allegations of serious impropriety on the part of the appellants with no proper basis to do so. The complaint opens by stating: “We are complaining about the conduct of John McGeechan of JBM Solicitors Ltd in respect of letters written to our firm…and to another firm of solicitors and to a firm of chartered accountants containing untrue allegations that solicitors at this firm conspired with a chartered accountant and members of a family to commit a fraud and carried out the fraud.”

The complaint refers to the letters of 5 March and adds: “Cop[i]es of the letters of 5 March 2014 and subsequent letters from JBM…are enclosed.”

[14] It is said that there had been no contact made prior to the letters of 5 March being sent, and no attempt to obtain information from the appellants, who maintain that the allegations made by JBM were made without properly checking the facts, recklessly, and without proper belief in their truth. The complaint maintains that, “it is clear from the correspondence” that JBM had no proper knowledge of the background facts, and concludes: “A solicitor has a duty to act ethically and with restraint and it was at least unsatisfactory professional conduct for such a serious allegation to have been made recklessly in intemperate language without any proper basis.”

[15] The Commission sent a summary of the complaint to the appellants on 2 June 2014, in which reference is made only to the letters of 5 March. The Commission proceeded to treat the complaint as restricted to the contents of the letters of 5 March. They noted that two of those letters concluded: “It may be that our clients are misinformed or that there is a genuine and legal explanation or reason. If this is the case please provide it as soon as possible.”

They referred to a response from JBM dated 7 March 2014 in which: “The firm confirmed that their communications in this matter were on the basis of their client’s instruction and they have thereafter sought counsel’s opinion. The firm stated that having reviewed their letters, they accepted that the issues were contentious and that they were asking difficult questions but they denied that they had been unprofessional or inappropriate.”

[16] The determination noted that there was no suggestion that the letters were sent other than in accordance with their client’s instructions or that the

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2016 S.C.L.R.

McSparran McCormick, Appellants (IH)

591

factual assertions were based on anything other than the version of events provided by their clients, and that the letters were seeking information and comment from the recipients. It concluded that in writing such a letter a solicitor did not warrant the truth of the allegations and that: “[P]rovided that he has information to support the allegations, in this case his client’s instructions, witnesses to the handing over of the will to Mr O’Hara of the accountancy firm and counsel’s opinion, there is no duty to conduct further investigation before writing such a letter…the solicitor was plainly entitled without further enquiry to accept the account of his clients and to write the letter on that basis.”

A

B

The Commission therefore dismissed the complaint as being totally without merit.

Submissions for appellants

[17] The appellants contended first, that the Commission, in seeking to follow the guidance in Law Society of Scotland v The Scottish Legal Complaints Commission, did so erroneously; and secondly, that it erred in considering only the terms of the letters of 5 March; and that in any event its determination was not supported by the facts. In terms of s.2(4) of the 2007 Act, after classifying a complaint as either a conduct complaint or a services complaint, the Commission required: “(a) to determine whether or not the complaint is frivolous, vexatious or totally without merit”.

[18] On such a determination the complaint would be dismissed; otherwise it would be remitted to the Law Society of Scotland for investigation. The sifting role of the Commission was considered in Law Society of Scotland v Scottish Legal Complaints Commission, in which a solicitor had written, on the instructions of his clients, asserting that the complainers had taken unauthorised access over his clients’ land, threatening interdict if they did not cease to do so. A complaint regarding the tone of the letter, and that it was factually inaccurate, was admitted and referred to the Law Society of Scotland, who appealed against the determination. At para.27 of his opinion Lord Kingarth said that the Commission’s reasoning proceeded: “… upon a fundamental misunderstanding of the relevant role and duty of the solicitor in the circumstances in which the letter of 6 July 2009 was written. It is accepted in para.3.5 that the solicitor was acting on his clients’ instructions. In the circumstances his duty, acting on those instructions and on information provided by his clients, was to report his clients’ concerns.

There is no suggestion in the respondents’ determination that he did anything other (a matter to which I will revert). In no sense could the solicitor, in these circumstances, be said to warrant, or be personally responsible for, the accuracy of what he was told. Nor could it be said that he had any duty to carry out any independent check or checks as to whether the information he received was true”.

The appellants accepted the reasoning in that case as a generality, but argued that it was not apt to cover a situation which involved imputations of fraud or dishonesty, particularly against a professional person, for whom the preservation of a reputation for probity and honesty was of the utmost importance.

[19] There was an important distinction between an assertion of primary fact and an assertion of inference drawn from primary fact. In Law Society of Scotland v Scottish Legal Complaints Commission the central assertion was of primary fact which the solicitor was entitled to take at face value. The present case was quite different. On the basis of the facts known to Mr McGeechan

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C

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F

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09/11/16 12:39 PM

592 A

B

C

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F

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5304.indd 592

McSparran McCormick, Appellants (IH)

2016 S.C.L.R.

one might reasonably infer that there had been a valid will in 1990, but it was quite another matter to proceed to the inference that the same will remained in existence at the date of death, that a valid will had deliberately been suppressed, that the deed of variation amounted to a fraud and that the appellants had been a party to that.

[20] The fact that a solicitor had no duty to act as a neutral inquisitor seeking some objective truth did not mean that the solicitor was thereby rendered free to say anything at all, provided that the assertions came from his client. In Law Society of Scotland v Scottish Legal Complaints Commission Lord Kingarth observed (para.26) that in the circumstances of that case: “There could be no question of any boundary, whether in terms of intemperate language or inappropriate threat, having been overstepped.”

This acknowledged that there was a dividing line and that the rules of professional conduct established clear limitations upon what a solicitor may or may not say in correspondence. That accords with the approach of the Scottish Solicitors Discipline Tribunal (SSDT) which, in its decision 806/90, expressly endorsed the following statement from the then current Guide to the Professional Conduct of Solicitors published by the Law Society of England and Wales: “A solicitor must at all times maintain his personal integrity and observe the requirements of good manners and courtesy towards other members of the profession or their staff, no matter how bitter the feelings between clients. He must not behave in a manner which is acrimonious or offensive or otherwise inconsistent with his position as a solicitor.”

To the same effect are the decisions of the SSDT in Lochiel Cushnie (SSDT 19.2.02) and Grant Docherty (SSDT 24.4.13) that unbridled, intemperate or abusive language and the offensive and unprofessional tone of certain letters was sufficient to amount to misconduct, membership of the profession carrying with it obligations of dignity and restraint. The Law Society of Scotland Practice Rules 2011 provide (r.B1, para.1.14.1) that a solicitor must deal with other regulated persons, including other solicitors “in a manner consistent with persons having mutual trust and confidence in each other”. Counsel submitted that solicitors were obliged to take particular care to identify the basis underlying accusations of dishonesty, and to refrain from making such accusations unless a proper basis for them existed.

[21] Against that background it would be impossible to conclude that the act of sending the letters in the present case could never amount even to unsatisfactory professional conduct. It was reasonable to assert that a substantial body of competent and reputable solicitors would regard the accusations made in the letters as outrageous, disgraceful and improper unless there was clear evidence of fraud to support them.

[22] The responsibilities on a pleader in respect of allegations of dishonesty were well understood, as noted by Lord Hodge in Grant Estates plc v Royal Bank of Scotland plc, para.93. It was acknowledged that the obligations in relation to correspondence may be less exacting, but it should be for the Law Society upon investigation to define the scope of the duty, whether it had been breached, if so to what extent, and whether the breach amounted to either professional misconduct or unsatisfactory professional conduct. The sifting exercise carried out by the Commission was one of very limited scope, where the threshold to be crossed by the complainer was a low one. The Commission should be slow to withdraw a conduct complaint from investigation on the basis of its own superficial assessment of the proper scope of professional duty.

09/11/16 12:39 PM

2016 S.C.L.R.

McSparran McCormick, Appellants (IH)

593

[23] As to the scope of the complaint, there was a distinction between the complaint itself and a summary of it. The complaint fell to be determined according to a fair reading of what the complaint was actually about, based upon all of the material submitted by the complainer to the Commission or otherwise before it.

[24] The Commission’s view that the fact that a solicitor acted upon client’s instructions rendered the solicitor immune to disciplinary sanction in respect of his correspondence was an unwarranted gloss upon the decision in Law Society of Scotland v Scottish Legal Complaints Commission.

A

B

Submissions for respondent

[25] For the respondent it was submitted that the Commission was entitled: (i) to treat the terms of the complaint as restricted to the letters of 5 March; and (ii) to dismiss the complaint as being totally without merit. Senior counsel for the respondent advanced the following propositions: (1) in writing the letters on clients’ instructions the solicitor did not warrant, or have responsibility for, the accuracy of what he had been told; (2) he had no duty to carry out an independent investigation as to its truth; (3) the respondent’s duty was restricted to considering the complaint actually made; and (4) The respondent had no duty to attempt to resolve any material dispute of fact bearing upon the complaint.

[26] The first three principles were derived from Law Society of Scotland v Scottish Legal Complaints Commission. The letters contained assertions of fact, made on instruction. The solicitor expressly represented that he was acting on behalf of named clients. He was not personally responsible for the accuracy of the information upon which the letters were based and was under no duty to carry out any investigation to establish whether the information was true: Law Society of Scotland v Scottish Legal Complaints Commission, (Lord Kingarth at para.27). The correspondence did not suggest that the appellants themselves were party to a fraud. The writer expressly accepted the possibility that his clients were misinformed, and invited the appellants to provide their explanation of events. It was no part of the appellants’ complaint that the language used by the solicitor was intemperate.

[27] It was not the function of the respondent to resolve any material dispute of fact, or to carry out an independent investigation to establish the truth or falsity of the information provided, or to attempt to evaluate the strength of the solicitor’s clients’ case: Saville-Smith v Scottish Legal Complaints Commission.

[28] In response to the appellants’ contention that the solicitor should have considered that the will might have been revoked, his instructions were that his client had produced a copy of the 1990 will at the meeting and that it was wilfully ignored. It was on the basis of this instruction in particular that the solicitor drew the legal inference that there was a scheme defrauding his clients of their share of the estate. In two of the letters he added a rider saying that his clients may be misinformed, in which case he was asking the solicitors to provide further information.

[29] The complaint made is about lack of investigation: there was no error in considering whether a complaint that the letter was written without investigation would be rejected by Law Society of Scotland. There was nothing wrong with a solicitor subjecting the facts to legal analysis and reaching a legal

5304.indd 593

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594 A

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McSparran McCormick, Appellants (IH)

2016 S.C.L.R.

conclusion. The fact of doing so did not mean that he was warranting the legal conclusion.

[30] Although the complaint was capable of covering the subsequent letters, the Commission could reasonably have read it as being restricted to the letters of 5 March. The summary which was sent to the complainers was revised by them but did not contain reference to any letters beyond those of 5 March.

[31] The determination of the Commission displays none of the errors upon which this court could reverse the decision. Reference was made to Saville Smith v Scottish Legal Complaints Commission in which the following was observed: “17 At the outset, we should note that in cases such as the present it is not the court’s function to substitute its decision for that of the Commission.

The court’s task is rather to ensure that the decision made by the Commission is one that such a body, properly directed in law, might reasonably make. If the decision of the Commission is lacking in rationality, as the appellant submits, it will of course fail that test and fall to be reduced.

In the present case, however, we are of opinion that the Commission’s decision cannot be criticised as irrational. In so holding, we recognise that the question facing the Commission is whether a complaint is ‘totally without merit’, the test specified in s.2(4) of the 2007 Act. That is clearly a low threshold. In the present case, however, when the involvement of Mr Brown with the internal appeal tribunal is properly analysed, we are of opinion that the Commission’s decision that the appellant’s first two heads of complaint were totally without merit is one that such a body could properly make. …

25 The appellant further contends that the Commission’s decision was not supported by the facts found by them. In considering this question, it is necessary to consider the whole of the Commission’s Reasons for Decision. The critical question is whether, on the facts found, the reasons given by the Commission are adequate to enable a reader to determine why the matter had been decided as it was: Wordie Property Co Ltd v Secretary of State for Scotland, 1984 SLT 345. It is not necessary that the reasons given by the Commission should be drafted to a particularly high standard; a document intimating a decision of this nature may be relatively informal, and all that is required is that it should meet the test just described. It is not fatal to the validity of such a document that some of the passages in it are badly expressed, or indeed incorrect, provided that the findings of fact and reasons taken as a whole satisfy the basic test of making the reasons for the decision intelligible. Subject to these matters, the weight of any particular consideration is a matter for the Commission as decision-maker; it is not the court’s function to substitute its decision for that of the Commission.”

It would always be a matter of degree whether there was sufficient material to justify a statement being made on a client’s behalf, but neither the solicitor nor the Commission was required to investigate whether the facts were true or not. The ultimate question was whether there was adequate material to make the allegation.

Discussion

G

5304.indd 594

[32] The grounds upon which an appeal against a decision of the Commission may be based are to be found in s.21(4) of the Legal Profession and Legal Aid (Scotland) Act 2007, namely: [Her Ladyship quoted the section as set out above and continued:] [33] The Commission proceeded on the basis that whether the allegations contained in the letter were true or false was irrelevant, so long as the allegations

09/11/16 12:39 PM

2016 S.C.L.R.

McSparran McCormick, Appellants (IH)

595

were made on the instructions of the client, and were not based on anything other than “the version of events provided by the client” (para.2.11). The Commission considered that even if the allegations turn out to be unfounded, a solicitor was entitled to make the allegations “provided he has information to support the allegations” (para.2.12). In this case, the solicitor did have such information, namely “his client’s instructions, witnesses to the handing over of the will to Mr O’Hara of the accountancy firm” (para.2.12). In my view in reaching these conclusions the Commission erred in law; its decision was not supported by the facts and was irrational. If the Commission’s determination is to be read as proceeding on the basis that the letters did not assert fraud on the part of the complainers, that is a further error.

[34] On that last matter, it was suggested by Mr McIlvride that the letters did not in fact assert fraud on the part of the complainers. That is in no way a reasonable reading of the letters, even those of 5 March, and in any event, it is not clear that it was a view reached by the Commission in relation to the correspondence in general. It is in my view impossible to read these letters as other than asserting fraud on the part of the complainers. The letter written to the complainers asserts that the deed of variation which they drew up in the knowledge of the existence of a prior will, appears to be a fraud resulting in Caroline Callaghan being cheated of her rights. The letter to Clark Boyle also asserts that the solicitors who drew up the deed of variation were aware of the existence of the will, having drafted it, and that the deed of variation would not be valid since one of the beneficiaries was not a party to that “pretended” deed. It concludes by asking whether Clark Boyle’s client would assist them “to correct the fraudulent distribution of the estate”. I accept that no such allegation is made in the letter to the accountants. In the subsequent correspondence the assertions of fraudulent conduct by the solicitors appear to be even clearer.

[35] In relation to the Commission’s decision that there can be no complaint where a solicitor writes a letter in accordance with his client’s instructions, I consider that the Commission has erred in considering that the observations in Law Society of Scotland v Scottish Legal Complaints Commission in relation to assertions of primary fact have equal validity in relation to inferences of fact or law. In relation to imputations of dishonesty it is not enough to entitle a solicitor to write letters of the type in this case that his client says “on these facts I assert I was cheated”. The solicitor must be able to conclude that on a reasonable interpretation of the facts it would be reasonable to draw an inference of dishonesty. Insofar as the Commission’s decision proceeded on the basis that a solicitor would be entitled to make any assertion in correspondence, so long as it was made on the instructions of his client, that is an error in law.

[36] Furthermore, the Commission concluded that the solicitor did have “information to support the allegations” from his clients who were “witnesses to handing over the will to Mr O’Hara of the accountancy firm”. This factor appears to have been highly significant in the Commission’s decision and was invoked as providing the link which was necessary to allow an inference of fraud to be drawn. It was not, of course, the will which was handed over, but a copy of it. The nub of the information given to JMB was that: (1) an apparently validly executed will had existed in 1990; (2) that in 2008 the estate was wound up on the basis of intestacy by means of a deed of variation; and (3) that the accountant had been given a copy of the will at the time of the signing of the deed of variation but had paid no heed to it. In my opinion that information is not sufficient to “support the allegations” as the Commission put it, or to provide the basis for the allegations of fraud on the part of

5304.indd 595

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596 A

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5304.indd 596

McSparran McCormick, Appellants (IH)

2016 S.C.L.R.

McSparran McCormack as contained in the letters complained of (and that is so even if the complaint is restricted to the letters of 5 March). There was no appreciation that what the solicitors had been shown was merely a copy of the will, and not the original deed. There was no appreciation that the conclusion involved the drawing of inferences from a chain of asserted facts, and that there was a clear gap in that chain. It was suggested that the decision-maker had taken the view there was no missing link in the chain of facts leading to an inference of fraud, but it seems clear that the decision-maker has not even appreciated that this case involved not simply a repetition of asserted fact but the drawing of an inference, far less that there was a link missing in the chain of reasoning which led to the inference.

[37] Mr McIlvride submitted that a solicitor was entitled to apply a legal analysis to the facts presented by his clients and to write accordingly. In general I accept that to be the case. However, applying a legal analysis to the facts presented would not lead to an inference of fraud, in the absence of facts indicating, or making it a necessary inference, that the will which had been prepared in 1990 remained in force at the time of death and had not been destroyed or revoked on the testator’s instructions. If the facts do not give rise to such a clear inference, an analysis proceeding on the basis of fraud would not be justified, and the facts provided by the client would not constitute “information to support the allegations”.

[38] In my view, counsel for the appellants was correct to draw a distinction between assertions of primary fact and inferences drawn from primary fact. In the present case the allegations made by the solicitors required the drawing of the inferences that: (a) the 1990 will must have remained in force at the time of death; (b) that the solicitors knew that; and (c) that they nevertheless wound up the estate according to intestacy, thus making themselves a party to fraud. The factual information provided to the solicitor did not provide any reasonable basis for drawing such inferences, and the Commission’s conclusion that it did so is not supported by the facts upon which it relies. The actions of the solicitors in this case went far beyond the mere factual assertions which had been made in Law Society of Scotland v Scottish Legal Complaints Commission.

[39] As counsel for the appellants recognised, a key part of a solicitor’s duty is to represent his client without fear or favour, even when to do so involves imputations of serious wrongdoing against others. To enable a solicitor to carry out that duty properly, his correspondence carries qualified privilege, but allegations of dishonesty should be made only where there is a clear justification for doing so. The obligations resting on solicitors in relation to their correspondence are less exacting than those which rest upon a pleader, but I am nevertheless of the view that allegations of fraud should not be lightly made or inferred even in the course of correspondence.

[40] The fact that two of the letters contains a rider that the clients may be under a misapprehension does not answer the matter. In the first place this is because, as I have noted, the allegations do not stem from primary facts provided by the client but from the unwarranted drawing by the solicitors themselves of conclusions of fraud. Secondly, only two of the letters contain the rider. The third letter, to Clark Boyle, in which clear allegations of fraud by the complainers are made in paragraphs numbered 2 and 3, contains no such rider, proceeds on the basis that these allegations are factually correct, and asks for Clark Boyle’s client to be a witness in assisting them to “correct the fraudulent distribution of the estate”.

[41] As to the scope of the complaint, this is a more delicate matter. I think that on a fair reading of the complaint it is indeed a complaint about the

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2016 S.C.L.R.

McSparran McCormick, Appellants (IH)

597

subsequent correspondence, not merely the letters of 5 March. It is perhaps unfortunate that the summary was not revised to make reference to the later letters, but these had clearly been alluded to in the original complaint. It rather seems as if the complainers assumed that the complaint would require to be remitted to the Law Society of Scotland for investigation in any event.

However, this matter may be of little moment, since I understand that there has been a further complaint which covers not only those letters but subsequent averments made in court pleadings. The present complaint is a complaint in general terms about allegations of fraud being made against the complainer with no proper basis for doing so; recklessly; and in intemperate language. It is not correct to classify it merely as one which asserts the allegations were made “without investigation”.

[42] The test for professional misconduct is set out in Sharp v Council of the Law Society of Scotland in the opinion of the court delivered by the Lord President (pp.134–135): “There are certain standards of conduct to be expected of competent and reputable solicitors. A departure from these standards which would be regarded by competent and reputable solicitors as serious and reprehensible may properly be categorised as professional misconduct. Whether or not the conduct complained of is a breach of rules or some other actings or omissions the same question falls to be asked and answered and in every case it will be essential to consider the whole circumstances and the degree of culpability which ought properly to be attached to the individual against whom the complaint is made.”

Unsatisfactory professional conduct, signifying a lower degree of culpability, has a statutory definition, found in s.46 of the 2007 Act: “ ‘unsatisfactory professional conduct’ means, as respects a practitioner who is— … . (d) a solicitor, professional conduct which is not of the standard which could reasonably be expected of a competent and reputable solicitor …”.

[43] I agree with counsel for the appellants that rejection of a complaint at the sift stage implies that it would not be open to the Law Society of Scotland to conclude that the conduct amounted even to unsatisfactory professional conduct. That decision is vitiated as having been reached on the basis of errors in law and being in certain respects unsupported by the facts found to be established by the Commission. The Commission’s decision is in my view irrational, in the sense that it is not one which a body such as the Commission might reasonably make. Accordingly, I propose to your Lordships that the appeal be allowed and the case remitted to the Commission to proceed as accords.

LORD DRUMMOND YOUNG [44] I agree that this appeal should be upheld. Nevertheless, the issues involved are of general importance, and I therefore propose to write my own concurring opinion.

[45] The Scottish Legal Complaints Commission rejected the applicants’ complaint as totally without merit on the ground that the letters complained of were sent in accordance with instructions given to a solicitor by his client.

In its determination, the Commission states that it is not suggested that the factual assertions made in the letters were based on anything other than the version of events provided to the solicitor by his clients (para.2.11).

5304.indd 597

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598 A

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5304.indd 598

McSparran McCormick, Appellants (IH)

2016 S.C.L.R.

Consequently two general propositions were operative: first, if a solicitor accepts an instruction and writes a letter repeating allegations made by his client, he does not give any implied warranty of the truth of the allegations; and secondly, provided that a solicitor has information to support the allegations, in the present case his client’s instructions, certain witnesses and counsel’s opinion, there was no duty to conduct further investigation before writing letters such as those complained of (para.2.12).

[46] In my opinion the approach taken by the Commission is too simplistic: it is not a complete answer to a complaint about a letter written by a solicitor to say that the letter merely represented a client’s instructions. In cases such as the present, a number of additional factors appear to me to be important, and I will discuss three of these. Before I do so, however, I would emphasise that the Commission’s function is to sift complaints, not to determine them; if a complaint is remitted the latter task falls to the Law Society, which conducts its own investigation of the case. It is the Law Society that is, generally speaking, the body best placed to evaluate whether a solicitor has been guilty of professional misconduct or unsatisfactory professional conduct. It follows that the threshold for remitting a complaint to the Law Society is relatively low. I would endorse the statements of your Ladyship and your Lordship that the test for rejection of a complaint as totally without merit is that it would not be open to the Law Society to conclude that the conduct complained of amounted to professional misconduct or unsatisfactory professional conduct.

[47] The first of the additional factors that I consider important in the present case is this: when a complaint is made about a letter written by solicitor on behalf of a client, it is essential to consider the seriousness of the allegations that are made in the letter. If the allegations amount to criminal conduct, or involve significant moral turpitude, the solicitor writing the letter should not merely take his client’s contentions at face value, but should ensure that some evidence exists to support them. The reason for this is obvious: the graver the allegation that is made, the more care should be taken before making it. This is an important point of distinction between the present case and Law Society v Scottish Legal Complaints Commission. In that case a letter had been written by a solicitor on behalf of his client to assert that the complainers had taken unauthorised access over the client’s land and to warn that if such conduct did not stop legal proceedings could be raised. There is no suggestion of moral turpitude in such a letter. All that was involved was a straightforward, and possibly disputed, case of trespass over another person’s land. In the event that the allegations in the letter were disputed, a letter of rebuttal could have been sent, and if proceedings were thereafter raised in court they could be defended.

The present case, by contrast, involves allegations of fraud, a much more serious matter. In any such case, I consider that care must be taken before allegations are made.

[48] Secondly, the allegations made in a typical solicitor’s letter are frequently—perhaps normally—not simple allegations of fact. They involve the application of the law to the facts of the case, or the drawing of legal inferences from those facts. Indeed, as is perhaps obvious, the purpose of employing a solicitor is to obtain the benefit of legal advice and analysis and to put the results of that analysis to other person—the person with whom the client is in dispute, or the other parties to a transaction. In giving advice as to the legal consequences of a factual scenario, it is to be expected that a solicitor will subject the facts to an appropriate degree of critical scrutiny before giving advice about the legal position. That is especially so where the inference that is contemplated involves criminal or seriously unethical conduct. When an

09/11/16 12:39 PM

2016 S.C.L.R.

McSparran McCormick, Appellants (IH)

599

allegation of fraud is made, that amounts to the drawing of a legal inference.

In such a case, it can be expected that a responsible solicitor will examine the facts with considerable care before advising that a case of fraud exists, and certainly before writing a letter making such an allegation in forthright terms.

In this respect there is a distinction from Law Society v Scottish Legal Complaints Commission, where the allegation that the complainers had taken unauthorised access over the solicitors’ clients’ land on a regular basis was essentially factual in nature: the fact of taking access and the absence of any authority.

[49] Thirdly, a distinction exists between a letter containing allegations about a particular person that is sent to that person and a letter containing such allegations that is sent to a third party. In the former case, the recipient can refute the allegations before anyone else becomes aware of them. In that way his reputation may be preserved. If the allegation is made directly to a third party, however, that is not possible. In my opinion this is a factor that may be relevant to a complaint of professional misconduct that involves the sending of letters implying criminal conduct or moral turpitude. This is a further distinction from Law Society v Scottish Legal Complaints Commission; in that case the only letter was sent directly to the persons against whom the allegation of trespass was made.

[50] The allegations complained of in the present case were contained in three letters sent on 5 March 2014, one to the present applicants, one to Clarke Boyle, the solicitors who acted for one of the primary beneficiaries of the deed of variation, and one to the accountants who acted for the deceased.

In the letter sent to the present applicants it was stated that at the meeting at which the deed of variation was agreed Justin Wilmot, a son of the deceased, gave a copy of the deceased’s will to Mr O’Hara, the accountant, but that that was ignored. The letter continued: “It appears that the deed of variation was a fraud that resulted in Caroline Callaghan being cheated of her rights under the will of Leslie Wilmot and that she has sustained significant financial loss.”

That was a clear allegation of fraud. The letter to Clarke Boyle referred to the deed of variation and stated that: “This deed appears therefore to be evidence of fraud on the part of those who benefited from the deed significantly and it raises questions about the actions of the law firm (the present applicants) and accountancy firm involved.”

At a later stage it referred to correcting the “fraudulent distribution” of the deceased’s estate. The letter to the accountants referred to Miss Callaghan’s being “cheated out of her rights under the will”, and stated that “a fairly substantial fraud has been committed”.

[51] Those are serious allegations; they amount to an assertion that the deed of variation was fraudulent, and it is plainly implied that the present applicants, who drafted the deed of variation, were parties to the fraud.

According to the applicants’ averments, the evidence that was available to support an inference of fraud was weak. The will in question had been executed 24 years previously, at a time when the deceased was cohabiting with Miss Callaghan. They had ceased to cohabit in 1994 and Miss Callaghan had married another man in 1999. Miss Callaghan was Mr McGeechan’s client, and it is therefore conceivable that [he was] aware of her present status. In those circumstances the possibility that the will had been revoked might appear a reasonable matter for consideration. If the will had been revoked, of

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600 A

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5304.indd 600

McSparran McCormick, Appellants (IH)

2016 S.C.L.R.

course, the allegation of fraud or dishonesty would be completely unfounded, because the deceased’s other children would simply have agreed by the deed of variation to deal with estate that passed to them on intestacy. Thus not only were the allegations serious; facts that were known to the writer of the letters that might be thought to merit deeper consideration.

[52] Furthermore, the allegations of fraud and “cheating” are not simple allegations of fact; they involve not only the collation of various primary facts but also the application of a legal standard to those facts. In particular, for fraud to exist there must be some kind of dishonesty. The writer of the letters of 5 March 2014 appears to have considered that the legal inference of dishonesty could be drawn from the facts that, first, Justin Wilmot produced a copy of the will at the meeting to discuss the deed of variation and secondly, the other children of the deceased and their professional advisers, including McSparran McCormick, ignored the copy will, proceeded with the deed of variation and distributed the estate on the basis that there was no will, thus depriving Miss Callaghan of her rights. The inference of fraud depends on a number of propositions: that the 1990 will (of which only a copy was available) remained valid; that the parties to the deed of variation and their professional advisers were aware that it was valid; and that in this knowledge they proceeded to execute and implement the deed of variation. All of these are matters that should arguably have been subjected to critical scrutiny, in view of the time that had elapsed since the original will was executed, the termination of Miss Callaghan’s relationship with the deceased and her subsequent marriage, and, it has to be said, the inherent improbability that any responsible professional firm would agree to such a transaction. It appears, however, that the Commission did not consider these matters in dismissing the complaint as totally without merit; instead they proceeded on the simple proposition that, because Miss Callaghan and Justin Wilmot had told them that the deceased’s will (of which the principal was not available) had been ignored, that was enough to justify an allegation of fraud.

[53] It is not of course the Commission’s function to determine whether a complaint is well founded; that is a matter ultimately for the Law Society in the event that a complaint is referred to it. Nevertheless, I am of opinion that Commission erred in law when it rejected the applicants’ complaint as being totally without merit. It treated the existence of assertions by a client as sufficient by itself to justify a letter notwithstanding the seriousness of the allegations made in that letter. Moreover, it did so without subjecting the allegations to reasonable scrutiny, in a situation where a degree of legal analysis was plainly required. Finally, the allegations were repeated to third parties. In those circumstances I am of opinion that it cannot be said that the complaint was “totally without merit”, in view of the low threshold that applies.

[54] The letter sent to the applicants and that sent to O’Haras concluded by stating that it was possible that Justin Wilmot and Caroline Callaghan were misinformed, or that there was a genuine and legal explanation or reason for what had happened. In my opinion such a qualification is not an answer to the complaint at the sifting stage.The substantive part of the letters is in unqualified terms; in the letter to the appellants it is stated that: “It appears that the deed of variation was a fraud that resulted in Caroline Callaghan being cheated of her rights…”, and the allegations of outright fraud are repeated in the other two letters. Furthermore, immediate legal action is threatened. In view of the seriousness of the allegations and the obvious difficulties created by the lapse of time and the change in Miss Callaghan’s relationship with the deceased, I consider that it is impossible to say that the rider at the end of the letters to the

09/11/16 12:39 PM

2016 S.C.L.R.

McSparran McCormick, Appellants (IH)

601

appellants and O’Haras necessarily had the result that the complaint was totally without merit.

[55] For the foregoing reasons I agree that the application must be allowed and the case remitted to the Commission to proceed as accords.

LORD MALCOLM [56] I agree with your Ladyship in the chair that this appeal should be upheld.

I wish to add only a few observations of my own. In the course of the discussion it became clear that the Commission’s view is that the effect of the decision in Law Society of Scotland v Scottish Legal Complaints Commission, is that there is no prospect of the complaint being upheld by the professional body. I consider that this was an error of law which entitles this court to interfere and impose its own decision on the question of whether the complaint is or is not totally without merit. While it is true that a solicitor can act only on the instructions of a client, there is no absolute obligation to do so whatever the circumstances.

It is not difficult to think of cases where it would be wrong to do so. It is of the essence of being an independent professional person that duties are owed to interests beyond that of the client and the solicitor’s own business.

[57] The context of the Law Society case was a complaint that certain persons were trespassing on another’s land. The factual situation was not complex. The author had clear evidence upon which to base his letter. In the present case it seems that it did not occur to the consulted solicitor that the original will might have been revoked, or, if it did, he chose to ignore that possibility. The allegation of fraudulent dishonesty on the part of various persons, including a solicitor and an accountant, involved an inferential leap which assumed only the most unfavourable construction of events. And the allegations were communicated to other parties, in this case solicitors acting for a member of the deceased’s family.

[58] All that said, it is important to stress that this court cannot and is not ruling upon the merits of the complaint. The only question is whether it can properly be categorised as totally without merit and therefore rejected as ineligible in terms of s.2 of the 2007 Act. The intention of Parliament was that the question of what is and what is not professional misconduct or unsatisfactory professional conduct is to be adjudicated upon by the relevant professional body. Thus it is only when it is clear that a reference would be a waste of time that the Commission should rule that a complaint is ineligible. It is unfortunate if the Law Society decision has engendered a view that a solicitor can never be impugned so long as his actions were supported by instructions from the client. Counsel for the Commission observed, in my view correctly, that a solicitor should not be put under improper pressure which might prevent the pursuit of the client’s best interests, if necessary by writing to another party in robust and critical terms. However, there is a balance to be struck, and sometimes, perhaps especially in the context of proper professional conduct, much will depend upon the full circumstances of the case, with a value judgment being taken upon them; a judgment which has been delegated to the relevant professional body.

[59] As mentioned earlier, the Commission proceeded upon the basis that their decision was pre-determined by the majority opinion in the Law Society case. In my view, so far as relevant to the present circumstances, all that can be taken from that decision is the following. Section 2(4)(a) of the 2007 Act presents the complainer with a “low threshold to meet to avoid rejection of his or her complaint before investigation …” (para.23). The letter at the heart of the complaint was in standard and measured terms in an adversarial situation.

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McSparran McCormick, Appellants (IH)

2016 S.C.L.R.

There was no question of a boundary having been overstepped (para.26).

The Commission had misunderstood the role and duty of the solicitor in the circumstances to report his client’s concerns. The solicitor did not warrant the accuracy of the terms of the letter; had no personal responsibility for them; and had no duty to carry out an independent check of their veracity (paras 27–29).

[60] No doubt it is the latter passage which has been interpreted as determinative of the present matter. However, I am satisfied that the court did not intend to send out a message that a solicitor can never be criticised so long as he acts on the basis of instructions given by a client. A solicitor is not under a general duty to report any and all allegations made by a client. There will be cases when it is necessary to ask—what is the proper professional course of action? Sometimes this may be to refrain from the worst inference, especially in respect of an allegation such as fraud, unless there is clear evidence in support of it. This is in line with the discussion in Paterson and Ritchie, Law Practice and Conduct for Solicitors (2nd edn), para.12.09. In the Law Society case the court was dealing with the particular circumstances of that complaint and the specific terms of the determination by the Commission. The reference to a duty to report the client’s concerns should not be elevated to a general principle applicable whatever the circumstances.

[61] In Law Society, I said that the test of “totally without merit” is different from that of “without merit”: “The latter would require consideration of the substance of the matter, allied to any necessary investigation. The statutory formula does not require this. It allows the sifting of complaints which, on their face, are obviously unworthy of any consideration or investigation by the professional body. It covers hopeless complaints where it is clear that further enquiries could make no difference… . the hurdle set by the phrase ‘totally without merit’ is very low.” (para.49) I note that in the present case, on the face of it, the Commission’s determination ignores this distinction. Rather than ask whether the professional body might consider the complaint worthy of investigation, the author enters into and resolves the merits of the complaint.This was another error in the Commission’s decision.

[62] In my view it cannot be said that the present complaint is totally without merit. I agree that the appeal should be upheld, the Commission’s decision quashed, and the matter remitted to the Commission to proceed as accords.

For the appellants: Brown, instructed by Ian Anderson, Solicitors, Edinburgh.

For the respondent: McIlvride QC, instructed by Harper McLeod LLP, Solicitors, Edinburgh.

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A COURT OF SESSION

28 January 2016

Inner House (Extra Division) Lord Justice Clerk (Carloway), Lord Bracadale and Lord Malcolm IRUM SHAH NAWAZ AND OTHERS

Appellants

B

Immigration—Leave to remain—Appeal—Necessity to show access to £200,000 worth of funds—Provision of evidence The appellants, citizens of Pakistan, sought leave to remain in the UK. The first appellant was the principal applicant and she sought leave as a tier 1 (entrepreneur) migrant. She had previously enjoyed leave because of her status as a tier 4 student. The other applicants were her husband and three children who applied as her dependants. In order to obtain sufficient points under the points-based system she had to show access to at least £200,000 for the purpose of investing in a business in the UK. Her application was refused on the basis that she had not complied with that requirement and thus had not gained sufficient points. The information supplied with the application showed that her husband held funds amounting to £202,000 in an account with Lloyds TSB and that he promised to make it available to her, but she had not provided the required letter from the bank confirming that the funds were available to her.

Appeals against this decision were refused by their First-tier Tribunal and then the Upper Tribunal. She appealed to the Court of Session on the basis that the Upper Tribunal erred in law by disregarding the funds held by her husband. After the date of the application but before its refusal, the funds had been used to purchase a garage and petrol station business in Cowdenbeath.

Counsel for the appellants submitted to the court that there had been a failure to apply “a modicum of intelligence, common sense and humanity”.

Counsel for the respondent submitted that the Upper Tribunal correctly concluded that there was no error in law in the decision of the First-tier Tribunal. The fact that the funds were held by the principal applicant’s husband did not mean that she should be credited with the points necessary for qualification. Purchase of the business could not retrospectively cure this failure. In any event there was no finding in fact as to the purchase of the business.

When granting leave to appeal an Upper Tribunal judge commented that the critical document was the bank’s letter and expressed the view that perhaps the case ought to have been considered under para.245AA(d)(iii)(1) of the Immigration Rules which dealt with “missing information…verifiable from… other documents submitted with the application”.

Counsel for the appellants argued that when necessary funds were held by a spouse and dependant of the principal applicant, the Secretary of State could not simply say no to the application. There was a common law duty to act in a fair, reasonable and rational manner. At a minimum the Secretary of State should have sought clarification. The consequences to the appellant and her dependant co-applicants would be drastic because they would require to sell their business and give up the life they have enjoyed for the last seven years in Scotland.

Counsel for the respondent argued that there was no error of law in the decision of the Upper Tribunal. Given that the appellant did not submit the necessary documents, there was no unfairness in refusing her application and there was no duty to make enquiries. In any event no purpose would have

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Nawaz, Petitioner (IH)

2016 S.C.L.R.

been served by further investigations because it had been said that the bank could not provide the necessary letter.

Held (1) that the in the instant case had the caseworker exercised discretion to give the applicant an opportunity to put the matter beyond doubt one would not have expected him or her to have been criticised, but it was an entirely different matter to conclude that failure to have done so was unlawful in the sense of a breach of the general duty of fairness and rationality (para.53); and (2) that as the necessary letter was missing and there was nothing to suggest that the husband had placed a funds under the control of his wife, common sense, humanity or “a modicum of intelligence� did not require a different approach from that taken by the Secretary of State and if there had been an outcome which could have been described as unfair it was one for which the applicants bore responsibility (para.54); and appeal against the decision of the Upper Tribunal refused.

Cases referred to:

C

D

E

Alam v Secretary of State for the Home Department, [2012] EWCA Civ 960 Alexander v Immigration Appeal Tribunal, [1982] 1 W.L.R. 1076; [1982] 2 All E.R. 766 E K (Ivory Coast) v Secretary of State for the Home Department, [2014] EWCA Civ 1517 Lloyd v McMahon, [1987] A.C. 625; [1987] 2 W.L.R. 821; [1987] 1 All E.R. 1118 Mahad (Ethiopia) v Entry Clearance Officer, [2009] UKSC 16; [2010] 1 W.L.R. 48; [2010] 2 All E.R. 535 Mandalia v Secretary of State for the Home Department, [2015] UKSC 59; [2015] 1 W.L.R. 4546; [2016] 4 All E.R. 189 M O (Nigeria) v Secretary of State for the Home Department, [2009] UKHL 25; [2009] 1 W.L.R. 1230; [2009] 3 All E.R. 1061 Patel v Secretary of State for the Home Department, [20913] UKSC 72; [2014] A.C. 651; [2013] 3 W.L.R. 1517; [2014] 1 All E.R. 1157 Rodriguez v Secretary of State for the Home Department, [2013] UKUT 42; [2014] EWCA Civ 2 R v Secretary of State for the Home Department, ex parte Doody, [1994] 1 A.C. 531; [1993] 3 W.L.R. 154; [1993] 3 All E.R. 9 R v Secretary of State for the Home Department, ex parte Forrester, [2008] EWHC 2307 R (on the application of Gu) v Secretary of State for the Home Department, [2015] 1 All E.R. 363 Secretary of State for the Home Department v Al Islam, [2013] EWCA Civ 754; [2014] 1 WLR 1768.

F

The full circumstances of the case and the arguments of counsel are to be found in the following opinion of the court which was delivered by Lord Malcolm on 28 January 2016.

G

LORD MALCOLM [1] In an application dated 9 October 2012 the appellants (who are citizens of Pakistan), sought leave to remain in the UK. The first appellant was the principal applicant. She sought leave as a tier 1 (entrepreneur) migrant.

(Previously she enjoyed leave because of her status as a tier 4 student.) The other applicants were her husband and three children who applied as her dependants. To gain sufficient points under the applicable points-based system (PBS) in pt.6A of the Immigration Rules, she had to show access to at least

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Nawaz, Petitioner (IH)

605

£200,000 for the purpose of investing in a business in the UK. On 16 March 2013 the application was refused on the basis that she had not complied with this requirement and thus had not gained sufficient points. The information supplied with the application showed that her husband held funds amounting to £202,000 in an account with Lloyds TSB, and that he promised to make it available to her. However she had not provided the required letter from the bank confirming that the funds were available to her.

[2] Appeals against this decision were refused by the First-tier Tribunal and then the Upper Tribunal. The matter comes before this court on the basis that the Upper Tribunal erred in law by disregarding the funds held by the husband.

After the date of the application, but before its refusal, the funds were used to purchase a garage and petrol station business in Cowdenbeath. Counsel for the appellants submitted that there had been a failure to apply “a modicum of intelligence, common sense and humanity”; reliance being placed upon, inter alia, R v Secretary of State for the Home Department, ex parte Forrester and Mahad (Ethiopia) v Entry Clearance Officer.

[3] For the respondent it was submitted that the Upper Tribunal correctly concluded that there was no error in law in the decision of the First-tier Tribunal.

The fact that the funds were held by the principal applicant’s husband did not mean that she should be credited with the points necessary for qualification.

Purchase of the business could not retrospectively cure this failure. In any event there was no finding in fact as to the purchase of the business. Among other decisions, reference was made to Alam v Secretary of State for the Home Department and Patel v Secretary of State for the Home Department.

A

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The decisions to date

D The Secretary of State’s decision letter of 16 March 2013

[4] The material supplied with the application included a letter to the principal applicant’s husband dated 9 October 2012 from Lloyds TSB confirming his bank account number and that, as at that date, there was a balance of £202,000.

On the same date the husband signed a witnessed, third-party declaration on the solicitors’ headed notepaper and addressed to the UK Borders Agency to the effect that, in relation to his wife’s application for entrepreneurial status in the UK, he gave his “full consent to the application to use (his) funds in the United Kingdom”. After stating the details of his account and the balance of £202,000, he declared that his wife had his “full authority to access the sum of £200,000… upon request for use in the UK, for the purpose of investing in her business”.

[5] The Secretary of State was not satisfied that the applicant had provided the documents required to be awarded points for having access to £200,000.

The relevant Immigration Rules stated that there should be a letter from the financial institution holding the funds, in this case Lloyds TSB, to confirm the amount of money available to the applicant. Among other things, the letter required to “confirm the amount of money provided to the applicant from any third party…that are held in that institution”: para. 41–SD(a)(i)(9). In the absence of such a letter from the bank, the Secretary of State was “unable to accept the funds from the third party that you are relying on”.

E

F

The decision of the First-tier Tribunal dated 8 November 2013

[6] The judge noted that the relevant part of the Immigration Rules required a letter from the bank stating, among other things, the applicant’s name, and the amount of money provided to the applicant from any third party along with their contact details. Evidence was led that the appellant had purchased

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Nawaz, Petitioner (IH)

2016 S.C.L.R.

a business in the UK. She could not remember when this was done, but thought it was in 2013. She did this because she was sure that her application would be allowed. She owned the business jointly with a partner, namely her sister-in-law. In her application she stated that no others were involved in the enterprise. This was explained on the basis that she may not have understood the technicalities of the matter. As for the requisite letter from the bank, she had asked for it, but “the system would not allow it to be produced”. Her solicitor accepted that the necessary document had not been produced.

[7] In reliance upon para.245AA of the rules and the decision of the Upper Tribunal in Rodriguez v Secretary of State for the Home Department, the submission was that the agency caseworker should have written requesting further information. The third-party declaration made it clear that money was available. Her husband had the funds and he intended to work in the business.

Given an opportunity to do so, the applicant could have provided the appropriate documentation.

[8] The First-tier Tribunal judge noted that the requirements in the relevant Immigration Rules were clear. The specified letter from the bank had not been provided, and, even at the time of the hearing before him, it remained unavailable. The explanation about the system not allowing it “seemed unlikely”. Para.245AA had no application where the specified document had not been submitted. The evidential flexibility policy discussed in Rodriguez expired on 30 June 2011 and therefore did not apply to this application. The check carried out as to the validity of an application referred to in Alam was a preliminary check looking for obvious omissions, for example, no fee enclosed, no photographs supplied, or no signature at the end of a form.

[9] Given the purchase of the business, the judge had some sympathy for the appellant, though she would have known the risk involved. The appeal was refused on the basis that the relevant rules were clear and the application had failed to comply with them. There was no obligation on the respondent to request the missing information. In her evidence the appellant said that she had read the relevant guidance so she would have known what was required.

The third-party declaration did not fill the gap. It was noted that there was no art.8 claim, and no evidence to suggest that it was engaged.

The proceedings before the Upper Tribunal

[10] When granting leave to appeal, an Upper Tribunal judge commented that the critical document was the bank’s letter of 9 October 2012. The view was expressed that perhaps the case ought to have been considered under para.245AA(d)(iii)(1) of the rules: “…missing information…verifiable from… other documents submitted with the application”, given that the owner of the bank account was the principal applicant’s husband, co-applicant and co-appellant. The appellants’ hopes “should not be unduly raised”, but the view was taken that the grounds of appeal merited debate rather than summary refusal of permission.

[11] The same Upper Tribunal judge heard the appeal and issued his decision on 7 April 2014. The case was said to turn on para.245AA, not on any evidential flexibility policy. Permission to appeal had been granted on the basis that the decision-maker should have applied para.245AA(d)(iii)(1), however the parties agreed that, as at the date of the decision, that provision had not been introduced.

Reference had been made to a letter from the bank of 21 October 2013 (postdating the original refusal of leave) which showed that by then the account had become a joint account, with a balance of £8,200. Counsel said that, at some unknown date, the account was transferred into joint names. The bulk of the

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2016 S.C.L.R.

Nawaz, Petitioner (IH)

607

money in the account had been used to purchase the business. The appellant had bought a genuine business. Counsel claimed that the “substance” of the rules had been met, with the case failing only “on a procedural basis”. As a result of timing issues, it had not been possible for the appellant to become a party to the account before the application was submitted. The funds should be treated as an asset of the marriage to which both spouses were entitled. The purchase of the business and the transfer of the account into joint names was “powerful evidence” that the appellant did have access to the necessary funds.

Furthermore, notwithstanding the statutory exclusion against consideration of post-decision evidence (s.85A of the Nationality, Immigration and Asylum Act 2002) this evidence became admissible by applying the discretion afforded by para.245AA insofar as it afforded a discretion concerning documents “in the wrong format”—a phrase which should be given a broad interpretation. Had the appellant been contacted, the required document could have been supplied within seven working days. The Upper Tribunal should exercise the para.245AA discretion. The Secretary of State should have exercised her discretion differently. The decision of the First-tier Tribunal should be reversed.

[12] For the Secretary of State it was submitted that the problem was not a formatting issue, thus para.245AA was of no relevance. There was nothing to prompt the decision-maker to exercise any discretion to seek further information.

[13] As with the First-tier Tribunal judge, the Upper Tribunal judge had sympathy for the appellant. However, purchasing the business involved a risk, and, strictly, she ought to have known of the flaw in the application. Had r.245AA(d)(iii)(1) been in place, there would have been force in the proposition that the missing information was verifiable from the documents submitted with the application. The submission that the bank letter was “in the wrong format” stretched the wording of para.245AA too far. The document itself was not deficient in any way. The money not being in her hands, the appellant needed a letter from the bank which contained the necessary information.

There was nothing in para.245AA as it stood at the date of the decision which would prompt the decision-maker to consider requesting further documents.

Indeed it appeared that the document was not available.

[14] In order to comply, the underlying financial arrangements would have had to be changed. The judge referred to the Court of Appeal’s decision in Alam at para.45, which is to the effect that there is no unfairness in the PBS requirement that all necessary documents must be produced with the application, even if “hard” cases will occur. While under s.86(3)(b) of the 2002 Act the First-tier Tribunal and the Upper Tribunal can interfere if a discretion should have been exercised differently, a refusal to depart from the rules is not the exercise of a discretion for that purpose (s.86(6)).

[15] When determining that the First-tier Tribunal had not erred in any point of law, the Upper Tribunal judge commented that, “now that it had come fully to light”, it was a matter for the Secretary of State whether the fact that the holder of the funds was the appellant’s husband and co-applicant, with the same interest in the outcome, justified discretion outside the rules being exercised in her favour.

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The submissions before this court Mr Caskie for the appellants

[16] When the necessary funds are held by a spouse and dependant of the principal applicant, the Secretary of State cannot simply say no to the application. Even before the introduction of para.245AA(d)(iii)(1), the

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2016 S.C.L.R.

Secretary of State had a common law duty to act in a fair, reasonable and rational manner. At a minimum, the Secretary of State should have sought clarification. Reference was made to the Upper Tribunal decision in Rodriguez.

It turned on the respondent’s evidential flexibility policy, which was applicable at the date of the determination in that case. The policy provided that all applicants would be given an opportunity to provide missing evidence prior to any rejection. The Upper Tribunal said that this was: “[H]armonious with the plainly detectable philosophy of progressive relaxation of the pre-2009 rigidity which prevailed in the determination of PBS applications and which consequentially had reduced the number of refusals” (para.12).

Reference was made to entrenched principles “designed to secure a fair, disciplined and properly informed decision-making process” (para.18). The evidential flexibility policy promulgated by the respondent shifted the emphasis from mechanistic prescription “towards flexibility, discretion and, ultimately, greater fairness to applicants” (para.22).

[17] Mr Caskie continued to the effect that it was clear on the documentation that the business had been bought using the funds in the bank account. The case of Forrester demonstrated that there is always a discretion, and scope for the exercise of “elementary common sense and humanity” (para.16). He explained that there was no scope for a fresh application, the relevant rules having been changed shortly after the date of the present application, thereby preventing students, such as the appellant, from applying under the scheme for entrepreneurs.

[18] Mr Caskie accepted that, as a generality, the comments in para.45 of Alam were correct, but there had to be exceptions. Here the intention was to invest and establish a business in the UK. The appellant met all the other onerous requirements to obtain leave to operate a business in this country. On the one point of concern, on any sensible view it would be apparent that the necessary funds were available—as has proved to be the case—albeit they were provided by her husband. Reference was made to Mahad at para.10, and to Mandalia v Secretary of State for the Home Department. The application for leave to remain should have been granted, failing which, at a minimum, further enquiry made of the principal applicant. Had Immigration Rule 245AA(d) (iii)(1) been in force at the time, all would have been well. As it is, the consequence for the appellant and her dependant co-applicants will be drastic.

They will require to sell the business and give up the life which they have enjoyed for the last seven years in Scotland.

Mr McIlvride QC for the respondent

F

G

5304.indd 608

[19] Mr McIlvride submitted that there was no error of law in the decision of the Upper Tribunal. Given that the appellant did not submit the necessary documents, there was no unfairness in refusing her application. There was no duty to make enquiries. No purpose would have been served by further investigations, it having been said that the bank could not provide the necessary letter. The Court of Appeal in Alam addressed the issue raised in this appeal.

Section 85A of the 2002 Act prevented the First-tier and Upper Tribunals from having regard to new material. The rules required the bank to confirm that the necessary funds would be available for the business. Large numbers of such applications are made, many of them from abroad. The Alam approach is based on pragmatism and good sense. The problem would have been resolved had the husband given the funds to his wife.

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2016 S.C.L.R.

Nawaz, Petitioner (IH)

609

[20] Counsel accepted that, even in the context of the PBS, there is a general public law duty of fairness, thus it might have been different had the Secretary of State been at fault in any way. The recent decision of the Supreme Court in Mandalia was distinguishable. It turned on the proper interpretation of instructions given to caseworkers concerning sequences of documents; instructions which ceased to apply one month before the present application was made. Rule 245AA superseded those instructions.

Mr Caskie in reply

[21] In a brief reply, Mr Caskie mentioned that an application fee of over £3,000 was paid. There were 1,666 entrepreneurial applications in the UK in 2013. This appeal concerned, in effect, a husband and wife application where, in point of fact, the business was bought before the application was determined.

The caseworker could have suggested that the funds be placed in an account in the wife’s name. The tribunals below erred in overlooking the common-sense view of what was required of a fair decision-maker in the particular circumstances of this case. Reference was made to Mandalia at paras 2 and 32–33.

B

C

The Immigration Rules

[22] The documentation submitted along with the application included a declaration of the principal applicant’s husband, which gave consent “to the application to use my funds in the UK” and authority to his wife to access £200,000 of his funds upon request for use in the UK for the purpose of investing in her business. In addition there was a letter from Lloyds TSB addressed to the husband confirming a balance of £202,000 in his account as at 9 October 2012, which was the date of the application. However, as is accepted, the necessary letter from the bank in terms of para.41–SD(a)(i)(9) was not provided.

[23] Para.41 of App.A to Pt.6A of the Immigration Rules begins by stating that an applicant will only be considered to have access to funds if the documents specified in para.41–SD are provided to show: (a) cash money to the amount required (here £200,000); and (b) that the applicant has permission to use the money to invest in a business in the UK. In addition, (c) the money must be held in a UK regulated financial institution or be transferable to the UK; and (d) the money must remain available to the applicant until such time as it is spent in the establishment or running of the applicant’s business.

[24] So far as applicable to the present circumstances, money being “available” to an applicant is defined as meaning that the funds are available from the third party named in the application under the terms of the declaration referred to in para.41–SD(b). In this regard the declaration from the third party must state that he has made the money available for the applicant to invest in a business in the UK, plus, amongst other things, confirmation that the money will remain available until it is transferred to the applicant or the business.

[25] Pausing here, and so far as relevant for present purposes, the scheme is that: (a) the third party has made the money available to the applicant; (b) the money is held by, for example, a UK bank; and (c) the third-party provider has promised not to remove it before it is used for the declared purpose. The purpose of the documentation specified in para.41–SD is to show: (a) access to £200,000; and (b) that the applicant has permission to use this money to invest in a UK business. So far as applicable to the circumstances of the present case, the precise requirement was a letter from Lloyds TSB “to

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confirm the amount of money available to the applicant”: para.41–SD(a)(i).

That letter required to meet a number of requirements, including: (9) confirmation of “the amount of money provided to the applicant from any third party that is held in (the bank)”.

[26] The problem with the material presented with the application is clear and obvious. The requirement was that the third party had made the money available to the applicant for investment purposes and promised not to interfere before the investment occurred. In addition the relevant financial institution had to confirm that it held the funds which the third party had made available to the applicant investor. For the third party simply to promise that his funds would be made available was not enough. The reasons for this are easy to understand. By the time of the decision on the application, the funds had been used for the purchase of a business in Cowdenbeath. For whatever reason, this was not brought to the attention of the UK Border Agency (UKBA). Had it been intimated, this may or may not have prompted enquiries concerning the provider of the funds and the ownership of the business. However the decision was taken on the basis of the incomplete documentation submitted with the application and in ignorance of the purchase of the business.

[27] The terms of Immigration Rule 245AA at the relevant time are of no assistance to the appellant. They confirmed that the specified documents required to be provided with the application. Documents submitted after the application would be considered only if they were: (a) missing from a submitted sequence of documents; (b) if a document was in the wrong format; or (c) to substitute an original for a copy document. No request would be made for a missing document. A subsequent amendment allowed consideration of an application if missing information was verifiable from other documents submitted after the application, but, unlike the Upper Tribunal judge, the court has difficulty in understanding how this would have helped. The fundamental problem was that the third party had not taken the steps necessary to provide reassurance, via the bank, that the money had been made available to the applicant and would remain available until the investment was made.

No amount of reference to other documentation submitted with the application would have filled this gap.

[28] The essence of the submission for the appellants is that, in the particular circumstances of this case, where the funds were held by the spouse of the applicant for entrepreneur status, and given that he was a dependant co-applicant with an obvious interest in the success of her application, the caseworker should have concluded that the funds were in fact available to her, and granted leave.

Failing that, at a minimum, the applicant should have been alerted to the problem, thereby allowing her to take appropriate steps, most obviously having the funds put into an account in her own name. It is said that any other approach contravenes the public law duty of fairness, and demonstrates a failure to exercise even a modicum of intelligence, common sense and humanity. In short, it is claimed that the proper balance between the public interest in sound immigration control and fairness to the applicants has not been achieved.

Discussion

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5304.indd 610

[29] At the relevant date, the discretion provided for by para.245AA was limited to the three circumstances mentioned above, none of which are applicable in the present case. None the less, and in our view correctly, counsel for the Secretary of State did not suggest that there was no place for the operation of the general public law duty of fairness, even when the PBS was being applied. The real question is—what does that general duty require?

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2016 S.C.L.R.

Nawaz, Petitioner (IH)

611

[30] The Immigration Rules are statements by a Minister of the Crown as to how the Crown proposes to exercise their executive power to control immigration—M O (Nigeria) v Secretary of State for the Home Department, Lord Hoffmann at para.6. Essentially they are statements of policy as to the exercise of administrative discretion. As a general rule, however detailed and prescriptive a policy might be, the decision-maker must always be open to the facts and circumstances of the particular case. However, in the field of immigration control the courts have recognised the practical implications of that general rule; implications which have been addressed by the PBS itself.

A

B

The decision of the Court of Appeal in Alam

[31] In Alam the Court of Appeal dealt with three appeals, all concerning the PBS. In his judgment, with which the other judges agreed, Sullivan LJ observed that the PBS is “very detailed and highly prescriptive. An important feature… is that it specifies the evidence that must be produced with the application in order to demonstrate that the criteria are met” (para.9). Before May 2011 there was a wide discretion for the admission of new evidence when a decision was under appeal (s.85(4) of the 2002 Act). This resulted in many appeals being allowed. His Lordship explained that s.19 of the UK Borders Act 2007 was enacted “to address this problem”. This was done by way of the introduction of the PBS and restrictions on new evidence being presented in the course of an appeal. After a long delay, this system was brought into force on 23 May 2011.

[32] Mr Alam’s fourth ground of appeal was that the common law duty of fairness imposed an obligation on the Secretary of State to contact him when specified documents were missing from his application, and to give him an opportunity to rectify the omission. Sullivan LJ commented that the detailed PBS was designed to secure predictability and consistency in a decisionmaking process which had to consider a very large number of applications. As a result it was highly prescriptive (para.43). None the less the public requirement of fairness still had to be observed. This might impose additional obligations on the Secretary of State as the decision-maker under the PBS. However, where the appellant was at fault in not supplying the specified documents with the application, there was “no unfairness” in refusing the application on the ground of a failure to demonstrate compliance with the rule under which leave was sought.

“The price of securing consistency and predictability is a lack of flexibility.

That may result in ‘hard’ decisions in individual cases, but that is not a justification for imposing an obligation on the Secretary of State to conduct a preliminary check of all applications to see whether they are accompanied by all of the specified documents, to contact applicants where this is not the case, and to give them an opportunity to supply the missing documents.

Imposing such an obligation would not only have significant resource implications, it would also extend the time taken by the decision-making process, contrary to the policy underlying the introduction of the PBS” (para.45).

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D

E

F

In due course Mr Alam’s case was considered by the UK Supreme Court, but the fourth ground of appeal was not maintained, thus the justices did not require to consider this issue.

The Court of Appeal’s decision in E K (Ivory Coast) v Secretary of State of the Home Department

[33] A similar issue was considered in E K (Ivory Coast), again by the Court of Appeal. The appellant applied for leave to remain in the UK as a

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tier 4 (general) student migrant. As required, she submitted a letter of confirmation of acceptance for studies issued by St Stephen’s College. While the application was pending, and as a result of an administrative error on the part of the college, St Stephen’s withdrew the letter. Because of this the applicant failed to achieve the necessary number of points, and her application was refused. The question was whether the Secretary of State should have delayed the decision until the applicant was told what had happened and been given an opportunity to correct any error on St Stephen’s part, or to find another college.

[34] The court was divided, with the lead majority judgment delivered by Sales LJ. His Lordship recognised the unfairness to the applicant, however the Secretary of State was not responsible for it. That lay with the acts and omissions of the college. The public law duty to act fairly did not impose an obligation upon the Secretary of State to give the applicant notice of the withdrawal of the letter and an opportunity to rectify it. Reference was made to the speech of Lord Mustill in R v Secretary of State for the Home Department, ex parte Doody at p.560D–G. Sales LJ noted that it is well established that the precise content of the duty to act fairly varies according to the particular decision-making context in which it falls to be applied. Reference was made to a passage in the speech of Lord Bridge of Harwich in Lloyd v McMahon, pp.702–703: “[T]he so-called rules of natural justice are not engraved on tablets of stone. To use the phrase which better expresses the underlying concept, what the requirements of fairness demand when any body, domestic, administrative or judicial, has to make a decision which will affect the rights of individuals depends on the character of the decision-making body, the kind of decision it has to make and the statutory or other framework in which it operates. In particular, it is well-established that when a statute has conferred on any body the power to make decisions affecting individuals, the courts will not only require the procedure prescribed by the statute to be followed, but will readily imply so much and no more to be introduced by way of additional procedural safeguards as will ensure the attainment of fairness.”

[35] Sales LJ observed that the PBS was intended to simplify the procedure to allow high volumes of applications to be processed in a fair and reasonably expeditious manner according to clear objective criteria. This was in the interests of all applicants. Reference was made to the judgment of Sullivan LJ in Alam, especially at para.45. The public duty of fairness should not be applied to the PBS “in such a manner as to undermine its intended mode of operation in a substantial way”. It should not prejudice the public benefits of a clear and predictable scheme operating according to objective criteria (para.31). The Secretary of State could not have identified the administrative error behind the withdrawal of the letter. It might have been due to a failure on the part of the applicant to pay fees or to attend the college. To expect the Secretary of State to investigate every withdrawal of such a letter and then delay the decision would be “a serious intrusion on the straightforward and relatively automatic operation of decision-making by the Secretary of State under the PBS” (para.32). It would be different if the Secretary of State bore responsibility for the problem, for example by having withdrawn accreditation to a college to issue such letters. In those circumstances the fair balance between, on the one hand, the public interest and the due operation of the PBS regime and, on the other hand, the individual interest of the appellant, would favour the latter.

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Nawaz, Petitioner (IH)

613

[36] Briggs LJ agreed with Sales LJ. Were it otherwise there would be “too great an inroad into the simplicity, predictability and relative speed of the PBS process”, particularly where the Secretary of State bore no responsibility for the mistake which caused the unfair outcome (para.59). In a dissenting judgment, Floyd LJ considered that the decision was unlawful in the absence of the applicant having been given an opportunity to investigate the new circumstances and make representations. He distinguished cases where there was a simple failure to supply the necessary documents, such as Rodriguez and Alam, from cases where there was a post-application material change of circumstances of which the applicant was unaware, for example withdrawal of a college’s license. In the latter category of cases, the applicant should be given an opportunity to deal with the changed circumstances, unless they were known to the applicant, were his/her fault, or were obviously irremediable. His Lordship took the view that such a principle “strikes the right balance between the need for the PBS to work efficiently, and for it to work fairly”.

A

B

The decision of the Court of Appeal in Rodriquez [2014]

[37] Earlier in this opinion reference was made to the appellant’s reliance upon the Upper Tribunal decision in Rodriguez. That case and two other appeals (Mandalia and Patel) came before the Court of Appeal, with a decision issued in January 2014. They all involved student migrant applications where a refusal was issued under the PBS because of a failure to provide evidence in the form of bank statements confirming possession of the necessary funds throughout a specified 28-day period. In each appeal the applicant was able to demonstrate that, despite the defects in the submitted evidence, they did have the necessary funds over the relevant period. The submission was that the Secretary of State’s evidential flexibility policy should have been applied thereby giving them the opportunity to remedy the deficiencies in their applications.

[38] Davis LJ gave the lead judgment in the Court of Appeal, with which Sir Stanley Burton and Pitchford LJ agreed. The primary issue was whether the reasoning of the Upper Tribunal in Rodriguez was correct. So far as Ms Rodriguez’s case was concerned, the defect concerned four days in the 28-day period when her bank balance fell below the required £1,200, namely to £903. Evidence led at the First-tier Tribunal as to a savings bank holding additional funds of £600 throughout the 28 days was regarded as inadmissible given the terms of s.85A of the 2002 Act. That decision was not challenged.

However the appellant relied upon the contents of a letter dated 19 May 2011 from the UKBA to “joint education task force members” for the proposition that she should have been given an opportunity to remedy the problem. The First-tier Tribunal judge rejected that proposition, and permission to appeal to the Upper Tribunal was granted. As mentioned earlier in this opinion, that appeal was upheld.

[39] In respect of the so-called “evidential flexibility” policy, Davis LJ commented on the vagueness of the available information as to its implementation. It was introduced in 2009 to address concerns as to undue harshness in the operation of the PBS. From time to time the policy was changed, then, from 6 September 2012 it was incorporated into the Immigration Rules by way of para.245AA, which in itself has been the subject of subsequent amendment. When originally introduced the policy allowed the correction of minor errors or omissions, the querying of details, and requests for further information, such as a missing wage slip or bank statement from a sequence of documents. By June 2011 there was no limit upon the amount of information which could be requested from the applicant. However, there had to be

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sufficient reason to believe that any evidence existed; such requests should not be speculative, with any benefit of the doubt on this point being given to the applicant. The Secretary of State’s letter of 19 May 2011 talked of, amongst other things, a validation stage being trialled where applicants would be given an opportunity to provide mandatory evidence missing from an application.

The Upper Tribunal in Rodriguez had placed particular weight upon this.

[40] Davis LJ noted that the Upper Tribunal decision in Rodriguez provoked debate. Criticisms had been made of the presentation of the appeal by the Home Office presenting officer (Ms Rodriguez represented herself). The lack of an informed debate in what was a test case was, in his Lordship’s view, “unfortunate”.

In a subsequent affidavit the officer had suggested that the letter of 19 May 2011 had no application to the Rodriguez case. However this had not been brought to the attention of the Upper Tribunal, which held that it introduced a new practice whereby all applicants would be notified of the absence of mandatory evidence and given an opportunity to rectify the deficiencies. The Upper Tribunal took the view that the Secretary of State had failed to have regard to this “dominant policy”, and that, in any event, the relevant caseworker had been unaware of the evidential flexibility policy. As already noted, the Upper Tribunal observed that the emphasis had shifted from “mechanistic prescription towards flexibility, discretion and, ultimately, greater fairness to applicants” (para.22).

[41] For the reasons given in paras 82–88, Davis LJ rejected the Upper Tribunal’s conclusions so far as based on the letter of 19 May 2011. It did not create a new policy. It referred to existing policy, as well as mooting some sort of trial. The relevant policy was to be found in the evidential flexibility process instructions. The learned judge did not agree with the Upper Tribunal’s conclusion that the policy had not been appreciated or had been ignored.

There was no evidence to that effect. Indeed it was refuted by the terms of the decision letter itself. Contrary to the apparent thinking of the Upper Tribunal, the policy did not require Ms Rodriguez to be given an opportunity to rectify the problem. Requests were not to be speculative. At the time there was no reason to believe that she had additional funds. She had not met the terms of the Immigration Rules. There was no reason to suspect a mistake or a gap in her application. The policy did not apply in her favour, thus it could not be assumed that it was not considered. Quite simply it did not avail Ms Rodriguez.

Davis LJ referred to Alam, including Sullivan LJ at para.45; remarks which, even allowing for the process instructions, remained apposite in the three cases before him.

[42] The Court of Appeal held that the Upper Tribunal erred in Rodriguez, and the First-tier Tribunal decision was restored. Similar reasoning was applied in respect of the appeals by Mr Mandalia and Ms Patel. The former was not a “missing sequence” case. As to the very minor shortfall in Patel, a “near miss” approach was not available in the PBS (Moses LJ at para.12 of Secretary of State for the Home Department v Al Islam). In short, a rule is a rule.

The Upper Tribunal judge in Patel was correct to conclude that the evidential flexibility policy did not require further enquiries in every case where there was a failure to meet the requirements of the Immigration Rules. In conclusion it was stressed that the Court of Appeal’s decision related only to the rules and guidance in operation at the time of the decisions in the three appeals.

The decisions in Forrester, Mahad, and Alexander

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[43] Mr Caskie placed reliance on the decision in Forrester. The claimant, a national of Jamaica, had arrived in the UK with leave to remain as a visitor

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Nawaz, Petitioner (IH)

615

until December 2002. Subsequently she received leave to remain as a student until November 2007. During that period she was joined by her daughter. In addition she was given permission to marry someone who had been settled in the UK for 38 years. In September 2007 her application to remain as a spouse was rejected for the sole reason that her cheque failed to clear. In December 2007, and promptly after intimation of the refusal, the application was resubmitted along with a cheque which in due course cleared the bank. That application was refused because it was submitted after her leave to remain in the UK had expired. She and her daughter were required to leave the UK, otherwise an offence would be committed and they could be remanded.

[44] Sullivan J (as he then was) explained that the refusal was in accordance with the rules—however the Secretary of State was given a discretion which it was expected would “be exercised with a modicum of intelligence, common sense and humanity” (para.7). The Secretary of State had observed that an application could be made from Jamaica, and there was no reason to suppose that thereafter entry clearance would be refused.Thus, no doubt at considerable public and private expense, the applicant and her daughter were being required to travel to Jamaica, remain there for a period, and then return to the UK. The decision was described as “manifestly disproportionate and unreasonable” (para.9). It was one thing to say that one should have a fair and firm immigration policy, but “quite another to say that one should have an immigration policy which is utterly inflexible and rigid and pays not the slightest regard to the particular circumstances of the individual case…” (para.13). The Secretary of State had maintained “a wholly perverse position” (para.16). The decision was quashed and it was hoped that “a little common sense and humanity” would prevail (para.17).

[45] Counsel also placed reliance upon the decision in Alexander v Immigration Appeal Tribunal, which held that the Immigration Rules were not to be construed with the strictness appropriate for a statute, but sensibly, according to the natural meaning of the language used. Mahad was another decision to a similar effect. When construing a rule, reference could be made to its primary purpose, which in that case was to ensure that prospective entrance to the UK could be maintained without recourse to public funds, and accordingly third-party financial support could be taken into account.

A

The decision of the UK Supreme Court in Mandalia v Secretary of State for the Home Department

E

[46] Both parties made reference to the decision of the UK Supreme Court in Mr Mandalia’s case, discussed earlier in the context of the Court of Appeal’s decision. Lord Wilson gave the judgment, with which the other justices agreed.

The rules required the application to be accompanied by a bank statement or statements showing that Mr Mandalia had held at least £5,400 for a consecutive period of 28 days ending no earlier than a month prior to the date of his application. The submitted statements showed the requisite funds, but only for a 22-day period. The question was whether the refusal was unlawful in the absence of a request for information regarding the six preceding days.

The Court of Appeal had answered this question in the negative. The appeal against that decision relied upon the then extant processing instructions issued to caseworkers. Lord Wilson noted that the PBS was extremely complex for applicants, but it had, to a substantial extent, relieved caseworkers of the need to consider whether to exercise discretions.

“The sharp edges of the rules have cut out hard cases which have found their way to the courts and which have inevitably attracted at any rate the

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2016 S.C.L.R.

A

sympathy of the judges and sometimes—I speak for myself—nascent reservations about the suitability of the system which have not been easy to suppress. But suppressed they must be. For the management of this type of immigration, in principle highly valuable for the UK, is a profound social challenge, of which the complexities are beyond the understanding of the courts—and, by not exercising its right to disapprove part 6A of the rules, Parliament has endorsed the Secretary of State’s considered opinion that a points-based systems is the optimum mechanism for achieving management of it” (para.2).

B

[47] The rules required Mr Mandalia to demonstrate that he had held at least £5,400 for a consecutive period of 28 days ending no earlier than 7 January 2012. The submitted bank statement, number 64, covered the period from 29 December 2011 to 19 January 2012. The opening entry was a credit balance brought forward of over £11,000. The closing entry was a credit balance carried forward of over £12,000. There were only eight modest debits, and two less modest credits. Throughout the balance never fell below £11,000. By letter Mr Mandalia was told that his application had been received and that if there was any problem as to the validity of the application, such as missing documentation or omissions in the form, he would be advised as to the action needed to rectify the problem. No such advice was tendered. On 21 April 2012 he was told that his application had been refused and that a decision had been made for his removal from the UK. The ground of refusal was the failure to demonstrate that he held a minimum of £5,400 for the full 28-day period, and thus he failed to secure the requisite points.

[48] Before the First-tier Tribunal Mr Mandalia had produced bank statements to demonstrate that he was more than able to satisfy the 28-day requirement, however s.85A of the Act, which came into force in May 2011, prevented the tribunal from considering post-application material. (There had been submissions in the Supreme Court as to the circumstances in which a fresh application could have been made, but Lord Wilson considered that any ability to do so was irrelevant to the issues in the case.) The First-tier Tribunal’s decision was appealed, unsuccessfully, inter alia, under reference to the document issued to caseworkers on 17 June 2011 entitled “PBS process instruction: evidential flexibility” (“the process instructions”) which, amongst other things, commented that it might be appropriate to ask a tier 4 applicant to provide missing bank statements from a sequence. The processing instructions applied to Mr Mandalia’s application, but they were withdrawn for all applications made after 6 September 2012 and replaced by Immigration Rule 245AA. In turn this rule was amended in September and again in October, both of 2013. Para. 245AA gave caseworkers considerably less flexibility than the process instructions, but repeated the encouragement to contact the applicant in respect of a document or documents missing from a sequence of documents.

[49] Lord Wilson reviewed case law to the general effect that an applicant has a public law right to expect that an extant policy will be applied. The case therefore turned on the proper interpretation of the process instructions. The court had been favoured with submissions as to whether when Mr Mandalia submitted bank statement number 64, numbers 63 and 62, which demonstrated the necessary funds for the six-day period, could be said to be “missing from a series”. The Court of Appeal had decided that this was not a missing sequence case, and that, in any event, it would be mere speculation as to what earlier statements would have shown. In R (on the application of Gu) v Secretary of State for the Home Department, Foskett J held that something cannot be missing from a sequence until the sequence itself exists. At least the start and

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Nawaz, Petitioner (IH)

617

the end of the sequence must be in evidence—the missing part had to be from within those two limits. Before the Supreme Court, “emboldened” by this decision and that of the Court of Appeal, the Secretary of State had submitted that the “two pillars” had to be before the caseworker before any question of the discretion concerning documents missing from a sequence would arise.

Lord Wilson considered this submission to be misplaced “even at the high level of pedantry on which it has been set” (para.33). It should have been obvious to the caseworker that bank statement 64 formed the last in a series, and that the statement or statements covering the earlier six days were missing from the series. However the caseworker did not need “to split such hairs” (para.34). The applicable process instructions said that there were no limits on the extra information that could be requested, provided the request was not speculative. Under the process instructions, a document missing from a series was but an example. (It should be noted that this is not true for para.245AA.) Furthermore the caseworker was instructed that the benefit of any doubt was to be given to the applicant. His Lordship continued: “Conferred as he was, with that necessary degree of flexibility, how could the caseworker have followed the process instructions otherwise than by requesting Mr Mandalia to provide the statement or statements which covered the first six days?” (para.35).

A

B

C

It was held that the refusal of the application was unlawful, and this without reference to the agency’s letter of 8 February 2012. In addition the decision in R (Gu) was overruled.

Decision

[50] Drawing the various strands together, the following general propositions can be offered: 1.

2.

3.

If the appellants are to receive relief, it can only be based on the Secretary of State’s general duty to act fairly and rationally. The policy in force at the time (the original r.245AA) is of no relevance to the present circumstances.

As a general rule there is no unfairness in refusing an application under the PBS when the application is not accompanied by all the specified documentation: Alam at para.45; Rodriguez in the Court of Appeal; and Mandalia at para.2. The high watermark of the more flexible approach was the Upper Tribunal decision in Rodriguez, but it was overruled by the Court of Appeal. In short, an applicant is expected to be appraised of the relevant requirements and to comply with them at the outset by lodging the appropriate supporting documents. If he does not, then he is responsible for an adverse decision, even if the underlying facts demonstrate a mistake or unfortunate omission.

That general rule can be overcome when such is justified after a consideration of the particular circumstances of the case; for example if the Secretary of State carries a degree of responsibility for the problem (E K (Ivory Coast)), or where the decision can be described as perverse, in defiance of common sense, or some equivalent epithet, as, for example, in Forrester and Mandalia.

[51] The concept of a general duty of fairness concerns not only the interests of those seeking leave, but also covers wider interests, including those of other applicants in an efficient and expeditious decision-making process. Given the

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2016 S.C.L.R.

pressure which has been imposed for several years upon limited resources, the PBS was designed as a practical and pragmatic response, albeit “hard” cases will occur.

[52] In deciding whether there is merit in the current appeal, the court must look at all the circumstances. In that regard it is relevant to note that the problem was not one of a missing document, at least not in the sense of a document which could have been produced, but was not. The necessary letter from the bank could not have been submitted until the principal applicant’s husband had, in the context of her investment in the UK business, made the money available to his wife for that purpose, and the bank was in a position to confirm that state of affairs. As it was, all the bank could vouch was the balance in the husband’s bank account as at 9 October 2012. For understandable reasons the rules do not allow a positive decision simply because someone, who is in a position to do so, promises to make the monies available at the time of the proposed investment.

[53] The submission for the appellants is that the caseworker should have taken the view that, since the funds were held by the proposed entrepreneur’s husband, who was also a dependant co-applicant, in effect the monies were available to her. It is contended that in these circumstances, the caseworker should have granted an exceptional leave outwith the rules, failing which, given her an opportunity to put the matter beyond doubt. Mr Caskie placed more emphasis upon the fall-back alternative. In my view this is understandable.

It is difficult to justify the imposition of an obligation on the Secretary of State to grant the application notwithstanding the breach of the rules.The alternative is more arguable. Had the caseworker exercised such a discretion, one would not expect him or her to be criticised. However, it is an entirely different matter to conclude that failure to do so was unlawful in the sense of a breach of the general duty of fairness and rationality.

[54] All the general considerations emphasised in Alam and E K (Ivory Coast) apply to the present case. We can identify no competing counterbalancing factor of sufficient materiality to outweigh them. The necessary letter was missing. There was nothing to suggest that the husband had placed the funds under the control of his wife. He simply promised to allow her to use them for the purchase of the business. In these circumstances we do not consider that common sense, humanity, or “a modicum of intelligence” required a different approach from that taken by the Secretary of State. It ought to have been obvious to the applicants, who had the benefit of legal advice from solicitors experienced in this area of practice, that unless the financial arrangements between the spouses allowed the required letter from the bank to be written and submitted, it was more than likely that the application would be refused. For whatever reason those financial arrangements were not put in place. Even assuming that it was the principal applicant who purchased the business, it has never been explained why the necessary steps were not taken at the time of the application. There is nothing to suggest that this was anything other than a deliberate decision. If there has been an outcome which can be described as unfair, it is one for which the applicants bear responsibility.

[55] In these circumstances, the appeal against the decision of the Upper Tribunal falls to be refused.

For the appellants: Caskie, instructed by Drummond Miller LLP, Solicitors, Edinburgh.

For the respondent: McIlvride QC, instructed by the Office of the Advocate General.

09/11/16 12:39 PM

A COURT OF SESSION

1 March 2016

Outer House Lady Wise GLENMORIE WIND FARM LTD

Petitioner

B

Judicial review—Planning—Natural justice—Respondents issuing new Scottish Planning Policy 2012—Whether parties should have been given the opportunity to comment—Whether reasons adequate Town and country planning—Natural justice—Respondents issuing new Scottish Planning Policy 2012—Whether parties should have been given the opportunity to comment—Whether reasons adequate The petitioner’s application for planning permission to build 34 wind turbines in Easter Ross was refused by the respondents (the Scottish Ministers) after an enquiry when the respondents adopted the recommendation of their reporter.

This recommendation was based on her conclusion that the proposed wind farm would have significant adverse environmental impact both alone and cumulatively and that it would conflict with aspects of national planning policy.

The contentious area in the application related to the development’s close proximity to areas of “wild land”. A policy in relation to “wild land” had been being developed over a period and continued to develop at the time the report was being submitted to Ministers. In June 2014 a new national planning policy— SPP 2014 (SPP2) was published which included a new national policy on the matter of “wild land”. The petitioner’s application was still pending when the policy was adopted, which was after the receipt of the reporter’s report but before the respondents’ decision letter of 21 August 2014. As a result, the process of identifying areas of wild land relevant to decision-making on applications such as that already submitted by the petitioner, was an ongoing process at the time of the formal enquiry and the reporter’s completion of her report. In her report the reporter described the landscape on the proposed site and adjacent to it as having “an over-riding absence of human activity and artefacts in the area which adds a sense of vastness to the landscape” and that the impact of the development on the landscape character of the area would be significant.

An issue arose as to whether further submissions should be invited from those involved in proposing and objecting to the development given that the reporter’s report and recommendations had been delivered but Ministers had not reached a decision; and correspondence was sent by email to the relevant parties inviting submissions on SPP 2 and the New National Planning Framework but that invitation was retracted shortly afterwards on the basis that it had been sent out in error.

The petitioner applied for judicial review of the decision. Counsel for the petitioner developed three possible grounds for review set out in detail in a note of argument for the petitioner. First, he argued that there had been procedural unfairness, breach of natural justice and denial of legitimate expectations. It was procedurally unfair for the first respondents to proceed to determine the petitioner’s application without giving consideration to the petitioner’s response to the publication of SPP 2014 and the relevant map of wild land areas. It was unfair for the first respondents to take considerations in that policy into account as giving rise to “greater concern” without comment or submission from the petitioner. While it was acknowledged that the petitioner’s agents had accepted

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that there was no requirement for the first respondents to receive further submissions on the new policy, it was still a breach of natural justice to draw adverse implications from new national policy and wild land mapping without having heard from the petitioner because these were new and material factors that had arisen since the submission of the reporter’s report. Secondly, the decision was challenged based on an argument that the first respondents had left material considerations out of account and given inadequate reasons for the decision the first respondents had failed to have regard to the specifics of the matter of wild land in terms of the new policy SPP 2014. Thirdly, the reporter had fallen into error by adopting an inconsistent approach when considering on the one hand the impact on landscape character of the proposed development and on the other the cumulative impact.

Counsel for the first respondents moved for dismissal of the petition.

He argued that if the petitioner’s argument was that there was a need for sitespecific analysis rather than simple reliance on any map in considering wild land then there had been one in this case. Secondly, the decision under challenge was an administrative decision by the Scottish Ministers on a planning matter and questions of planning judgment were for them as decision-makers. The court was concerned only with the legality of the process. Thirdly, the decision which had to be made was a policy judgment and in reaching the conclusion that they did the first respondents were entitled to accept the reporter’s conclusions as sufficient basis for it. Fourthly, the changes in policy between the original search areas for wild land, the core areas of wild land and ultimately the core map did not affect the conclusion on visual impact which the reporter had made and was entitled to make.

Counsel for the second respondents (Highland Council) also submitted that the petition should be dismissed and made four main points in answer to the arguments on the wild land issue. First, the new policy SPP 2014 intensified or added to the protection of wild land, which now had national significance rather than just regional significance. Secondly, the petitioner had been unable to criticise any of the reporter’s conclusions on the wild land issues which had been adopted in full by the first respondents. Thirdly, emphasis had been placed on the lack of objection by Scottish National Heritage but such a lack of objection meant nothing more than that in the view of that organisation the impacts of the proposed development were not regarded as being of national significance. Fourthly, there had not been a substantial dispute about the categorisation of wild land areas at the enquiry.

Held (1) that in the absence of any suggestion that any other party’s proposed submissions were in fact taken into account the result had been that which would have subsisted had the initial invitation never had been tendered and accordingly it was difficult to conclude that there had been any unfairness, far less unfairness resulting in material prejudice to the petitioner and the petitioner did not and could not suggest that the submissions it was denied the opportunity of making would have been to the effect that the new policy on mapping were favourable to the application (paras 47, 48); (2) that the first respondents dealt with all parties involved in an evenhanded manner after SPP 2014 had been published and against the factual background which existed there was no procedural unfairness which could have been said to have materially prejudiced the petitioner’s position (para.49); (3) that the petitioner’s position on the new policy and map was not a material consideration that ought to have been taken into account (para.54); and (4) that there was no procedural unfairness, illegality, lack of reasoning or methodological error which might have justified reducing the decision intimated (para.59); and petition dismissed.

Cases referred to:

G

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Bushell v Secretary of State for the Environment, [1981] A.C. 75; [1980] 3 W.L.R. 22; [1980] 2 All E.R. 608

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Glenmorie Wind Farm Ltd, Petitioner (OH)

621

Hopkins Development Ltd v Secretary of State for Communities and Local Government, [2014] EWCA Civ 470 Loch Hill Wind Farm (Scotland) Ltd v Scottish Ministers, 2015 CSIH 37 Moray Council v Scottish Ministers, [2006] CSIH 41; (I.H.) 2007 S.C.L.R. 55; 2006 SC 691 South Buckinghamshire District Council v Porter (No.2), [2004] UKHL 33; [2004] 1 W.L.R. 1953; [2004] 4 All E.R. 775 Tesco Stores Ltd v Secretary of State for the Environment, [1995] 1 W.L.R. 759; [1995] 2 All E.R. 636.

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B

The full circumstances of the case and the arguments of counsel are to be found in the following opinion of the Lord Ordinary which was issued on 1 March 2016.

LADY WISE Introduction

[1] This is a petition for judicial review challenging a decision of the first respondents dated 21 August 2014, adopting the recommendation of their reporter, dated 8 May 2014, to refuse the petitioner’s application for planning permission to build 34 wind turbines in Easter Ross, north of Inverness. The reporter’s recommendation was based on her conclusion that the proposed wind farm would have significant adverse environmental impact both alone and cumulatively and that it would conflict with aspects of national planning policy.

[2] The petitioner’s application for consent under s.36 of the Electricity Act 1989 for the construction and operation of Glenmorie wind farm was made on 10 November 2011. On the same date the petitioner submitted an appropriate environmental statement. In addition to representations by the local planning authority, Scottish National Heritage (SNH) and the Scottish Environmental Protection Agency (SEPA), 248 public representations were received in respect of the said application—200 objections and 38 in support. In particular, Highland Council objected to the application and in accordance with para.2 of Sched.8 to the Electricity Act 1989 a public local inquiry was held. Following that inquiry the reporter submitted her report to the Scottish Government on 8 May 2014. One of the contentious issues at the inquiry was the proximity of the proposed development to areas of “wild land”. A policy in relation to “wild land” had been developing over a number of years and continued to develop at the time that the report was being submitted to Ministers. On 23 June 2014 a new national planning policy—SPP 2014 (SPP2)—was published which included a new national policy on the issue of “wild land”. Accordingly, the petitioner’s application was still pending when that policy was adopted, which was after the receipt of the reporter’s report but before the decision letter of 21 August 2014. For that reason, it is useful to summarise the development of policy on wild land before considering the arguments presented in support of the petition and in response. Most of the detail of the factual background was set out, helpfully, by senior counsel for the petitioner in his submissions.

C

D

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Chronological summary of the development of “wild land” policy

[3] All of the documents that narrate the relevant background are contained in the tabulated bundles of joint productions lodged in process.The chronology starts with a Scottish National Heritage review in 1999 (No.119) entitled “Ross and Cromarty landscape character assessment” (Joint productions Tab.2). That review describes the undulating moorland and rounded hills land

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character assessment of the relevant area as at 1999. Wind energy was relatively new with only one wind farm operational in the area at the time of the review.

Also in 1999 the then Scottish Office published National Planning Policy Guidelines No.14 on natural heritage (NPPG 14)—tab.1. The glossary of terms therein defined “wild land” as: “Uninhabited and often inaccessible countryside where the influence of human activity on the character and quality of the environment has been minimal.”

B

The guidelines emphasise the importance of protecting and enhancing a variety of Scottish landscapes including those: “valued nationally and internationally for their quality, extensiveness and wild land character”. (para.11). The guidelines confirm the important role of SNH in recommending areas of outstanding value to the natural heritage of Scotland and for which special protection measures might be appropriate.

[4] In July 2002 SNH issued a policy statement entitled “Wildness in Scotland’s countryside” (Tab.3). In that statement the issue of how to identify wildness and wild land in the landscapes is discussed. A distinction is drawn between wildness—the quality enjoyed—and wild land or places where wildness is best expressed. It is noted that the appreciation of wildness is a matter of an individual’s experience and their perceptions of and preferences for landscapes of that kind. The range of values people find in wild landscapes is listed as including engagement with the physical world, solitude and sanctuary, closeness to nature and wildness as a quality in its own right. At para.5 the statement suggests that “wilderness” may be a term best avoided in Scotland because it implies a more pristine setting than can be experienced in the Scottish countryside where even wild land tends to show some effects from past human use. The statement goes on to suggest that: “The term wild land is also best reserved for those now limited core areas of mountain and moorland and remote coast, which mostly lie beyond contemporary human artefacts such as roads or other development.”

C

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The importance of Scotland’s wild land is emphasised and the comment made that renewable energy projects have the potential to impinge on the character of wild land (para.25). SNH identifies its policy aim in the statement (at para.34) as being that: “There are parts of Scotland where the wild character of the landscape, its related recreational value and potential for nature are such that these areas should be safeguarded against inappropriate development or land-use change.”

Importantly, while a designation of wild and natural areas was thought to be inappropriate, as a way forward, SNH considered it desirable that there be some consistency from a national stance on the issue. Accordingly an approach to the identification of wild land is set out in Annx.1 to the statement with a view to SNH leading a process of debate about the matter. The physical attributes said to contribute to the experience of wildness (and thereby to the identification of wild land) and perceptual responses evoked by those physical attributes are all listed in Appx.1 of the paper. The document concludes by stating that the identification of wild land will depend on all the physical attributes being present. The map attached to the statement (Map.3) presented a preliminary search map for areas of wild land (SAWL’s)with a view to further debate with various interested parties.

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[5] The next document of significance published was a further SNH paper dated February 2007 entitled “Assessing the impacts on wild land: interim guidance note” (Tab.5). This note suggests an assessment method for the impact on wild land of any development. It proposes a two-stage assessment, first, by establishing a baseline of the condition and extent of the wild land resource and secondly, assessing the magnitude and significance of the impact upon it. A statement has now been inserted at the beginning of the current form of the note confirming that the guidance in it is being reviewed in light of SPP 2014 with a comment that the wild land areas in that policy supersede the land SAWLs. In December 2009 SNH published a document entitled “Sighting and designing wind farms in the landscape”. This document refers to the need to carry out a landscape impact assessment (LIA) to assess the landscape character of the relevant area and to identify the key characteristics relevant to any wind farm development. There is recognition that while an area may be identified as being suitable for multiple wind farms there will be a limit on the number or extent of wind farms which can be reasonably accommodated. There followed the Scottish Government’s Scottish Planning Policy 2010 (SPP 2010), the relevant policy until replaced by SPP 2014. SPP 2010 stated at para.128 that: “Areas of wild land character in some of Scotland’s remoter upland mountain and coastal areas are very sensitive to any form of development or intrusive human activity and planning authorities should safeguard the character of these areas in the development plan.”

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This general statement was not made with reference to any SNH mapping exercise. This was the policy in place at the time the petitioner submitted its application.

D The progress of the Glenmorie wind farm application

[6] A request was made by the petitioner to the first respondents for a scoping opinion on the proposed Glenmorie wind farm which the first respondents were obliged to produce in terms of the Electricity Works (Environmental Impact Assessment) (Scotland) Regulations 2000 [SSI 2000/320]. The opinion noted that while the proposed development was not directly located within a SAWL the visibility of its tall structures could impact on adjacent wild land and a thorough environmental statement was recommended (Tab.8).

SNH provided a preliminary formal response to the proposed application supportive of the undertaking of a cumulative landscape and visual assessment, given the proximity of the proposed development to the wind farm operation at Beinn Tharsuinn and the adjacent wind farm at Novar (Tab.9).

[7] The petitioner, through its planning agent, submitted the formal application together with an accompanying environmental statement in support. For the purpose of the environmental statement (Tab.13), insofar as it identified the extent and condition of wild land affected by the application, the relevant study area was divided into five smaller areas described partly by reference to their proximity to the SNH SAWL as follows: 1.

2.

3.

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Area A: to the west outwith the site area (around 150m to the nearest turbine) and within the SAWL. Area B: the western part of the development site a relatively level plateau area…outwith the SAWL but displaying some wild land attributes.

Area C: the central part of the development site, covering the northeastern edge of the plateau classified as Area B and the north-east facing upper slopes of the Abhainn Glac an t Seilich glen, outwith the SAWL;

E

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4.

5.

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Area D: the incised glen of the Abhainn Glac an t Seilich, with steeply sloped sides and partially forested no turbines in this area but site infrastructure will be apparent, outwith the SAWL; Area E: the eastern part of the development site, covering the upper eastern slopes of the Abhainn Glac an t Seilich glen and the ridge of Meall Bhenneit, outwith the SAWL.

The environmental statement submitted by the petitioner concluded (Tab.13 at para.1.47) that the effect of the development on Area A would be significant and (at para.1.49) that the significant effect on that wild land was likely to extend to around 7 kilometres to the west from the edge of the development site. The statement notes (at para.1.50) that while the area within this 7 kilometre radius to the west of the development falls within the SAWL the author’s site visit and study of aerial photography indicated that not all of the area was likely to be considered “true wild land”.

[8] On 10 February 2012 the petitioner, through agents, amended the application by removing nine of the turbines included in the original application.

No other changes were made. SNH had objected to the petitioners’ application as originally lodged. However, by letter of 2 August 2012 that organisation formally withdrew its objection (Tab.21). The concern had been the significant adverse impact on the nearby Dornoch Firth national scenic area and that had been addressed by the removal of the nine turbines in question. SNH continued to point out the significant cumulative landscape impacts of the proposed development particularly to the nearby SAWL. [9] The second respondent (Highland Council), by letter of 18 February 2013 objected to the petitioner’s application. One of the reasons for the council’s decision to object was that it regarded the application as in conflict with the Scottish Government’s National Planning Framework for Scotland (paras 99 and 128) with regard to SAWLs [10] During 2013 a policy in relation to wild land continued to develop.

SNH published a new map in April 2013 described as “core areas of wild land in Scotland 2013” (CAWL’s) (Tab.26). In May of that year the chief planner for Scotland wrote to all convenors/heads of planning recording that while a new planning framework and draft Scottish Planning Policy were being launched the current national planning framework 2 and SPP 2010 remained the Scottish Government’s policy until further notice (Tab.27). In the meantime, the reporter appointed to deal with the petitioner’s application set about contacting those with an interest. On 4 September 2013 SNH responded to the request for additional comments. In relation to the applicability of the new CAWL map as distinct from the previous SAWLs identified, SNH confirmed that until the government reached any conclusion and confirmed its approach SNH continued to apply the established set of SAWLs in their advice. SNH’s advice on the cumulative impact of the proposed Glenmorie wind farm remained unchanged.

[11] The petitioner instructed a report which was prepared by environmental consultants to inform and assist the petitioner’s case at the inquiry sessions that the reporter had fixed for October 2013. The report (Tab.34) addressed the issue of effects of the proposed wind farm on SAWL’s. The consultants instructed by the petitioner sought to identify inconsistencies in the mapping exercise undertaken by SNH but expressed the view that the main consideration in relation to the significant landscape effects arising from the proposal was whether the Glenmorie wind farm would “tip the balance” in respect of the cumulative capacity of the area. The view expressed by the consultants in

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625

question was that the Glenmorie project would introduce only a limited additional cumulative influence to the landscape when seen from the majority of routes around and through the relevant area. The submissions made at the inquiry both on behalf of the petitioner and the Highland Council are lodged at Tabs.37 and 36 respectively.

[12] In November 2013 SNH published a consultation paper in relation to its CAWL’s 2013 map. The paper acknowledged that the map represented a deskbased study and that field survey work would have to be undertaken on a caseby-case basis before any decisions could be taken…(Tabs.38 and 39). The petitioner submitted a response to that consultation (Tab.39). Accordingly, the process of identifying areas of wild land relevant to decision-making on applications such as that already submitted by petitioner, was an ongoing process at the time of the formal inquiry and the reporter’s completion of her report.

A

B

Report to the Scottish Ministers on the petitioner’s application

[13] The report and recommendation of the reporter to the first respondents is dated 8 May 2014 and is produced at Tab.40. It contains seven separate chapters in the main report together with five appendices.

[14] In Ch.2 the case for each party on the contentious issue of landscape and visual impact is summarised. One of the central issues is concisely stated as being whether the petitioner’s application “tips the balance” in relation to cumulative effects. Ch.7 contains the reasoned conclusions and recommendations of the reporter and was subsequently adopted by the first respondents in the decision letter. This chapter acknowledges that the proposed development would make a significant contribution towards meeting the relevant renewable energy targets (para.7.7). In describing the landscape both on the proposed site and adjacent to it the reporter records that: “There is an over-riding absence of human activity and artefacts in the area which adds a sense of vastness to the landscape.”

The reporter records agreement with the contention that the resulting impact of the development on the landscape character of the area would be significant (para.7.12). The concern related to the vertical form of the wind turbines which would draw attention in a landscape with a lack of obvious manmade focal points and would contrast directly with the overriding lack of existing human activity in the area around the proposed site. The author of the report states the following: “The wind turbines, associated access tracks and other infrastructure would all unacceptably conflict with the characteristic sense of remoteness of this landscape type and I agree that there would be a resultant significant effect on landscape character in certain areas” (para.7.14).

[15] The reporter records disagreement with the petitioner’s stance that the negative effects of the development would be limited by their influence to such a degree as to make them acceptable and she rejected the suggestion that the context of this large-scale landscape setting had the inherent capacity to absorb the proposed changes. The reporter found that the overall impact on the currently open, vast, remote landscape characteristics of the area would be both “significant and adverse” (para.7.19). While previous approval of other wind farms in surrounding area is acknowledged, it is specifically recorded as not altering the reporter’s conclusion (para.7.20).

[16] After dealing with the impact of the proposed development on specific landscape designations in the area the reporter addresses the impact on wild

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land. The reporter records the five areas of potential impact identified in the environmental statement. It is recorded that Area A lying to the west of the proposed site is within the SAWL and has been assessed as true wild land while the other four (B–E) are outwith the SAWL and assessed as not true wild land. The SNH guidance is acknowledged which states that a detractor does not have to be within an area of wild land to affect it. The difference between the core areas of wild land and the search area for wild land is acknowledged and accompanied by the following statement: “I must also acknowledge that the core areas are the subject of a current consultation exercise after which their boundaries could change. I concur with the view of Scottish Natural Heritage that until the government concludes this consultation and confirms its approach, the established set of search areas for wild land should continue to be applied. I have, as a consequence, focused my consideration of the proposal in relation to wild land, to its impact on the search area for wild land” (para.7.35).

The reporter concludes that the proposed development would have a significant and adverse impact on wild land to the west of the proposed site currently identified as a SAWL. The report goes on: “This would extend beyond 7 kilometres and could have a significant and adverse impact for up to a maximum of 15 kilometres range and into the heart of the wild land area. This may not to date, in the view of Scottish Natural Heritage, be of national significance. However the proposed development would detract from the wildness qualities experienced in a significant proportion of this individual search area for wild land (and an even larger proportion of a core area of wild land, if confirmed).

The existence of other consented wind farms in or within 10 kilometres of search areas for wild land does not alter my view that the proposed development would cause significant attrition in the extent and quality of this area of wild land, in both the local and Highland context” (para.7.36).

[17] In a section on cumulative impacts the reporter records that there are 15 wind farms consented, under construction or operational within 35 kilometres of the proposed development and a further four at application stage. She records her agreement with the council and other objectors: “[T]hat the addition of the proposed development would make a notable contribution to cumulative landscape effects by extending both combined and sequential effects westwards and over a wide area. The significant and adverse cumulative impacts would affect the characteristics of the rounded hills unit 1 landscape, as a whole” (para.7.49).

[18] The report also records that the proposed wind farm would add new elements to the north of a panorama that already contains views of existing or consented wind farms to the north-east, south and south-west, rendering the cumulative impact of adding a wind farm of the scale proposed on views to the north significant and adverse. The specific effects of the proposed development on various local viewpoints is discussed. The reporter summarises the adverse landscape and visual impact of the proposed development and records in particular that: “The proposed wind farm would both alone and cumulatively detract from the wildness qualities experienced in a significant proportion of the adjacent search area for wild land and as a consequence would not safeguard the wild land resource of the area” (para.7.67).

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[19] Reference is also made in the report to the existing and emerging National Planning Policy but in light of the lack of finalisation of the emerging policy documents it is recorded that the reporter has relied on the “current suite of policies” in her considerations (para.7.85).

[20] The reporter’s overall conclusions are contained at paras 7.125–7.135 inclusive. As will be seen, these conclusions were later repeated in full in the first respondents’ decision letter. The conclusions clarify the determining issues as balancing the energy policy and the need for the proposed wind farm against its environmental and other impacts. They end as follows: “… I conclude that the benefits of the proposed development in making a significant contribution to national renewable energy targets, a modest contribution to the local economy during operation with a more substantial contribution during construction and possible improvements to recreational access, would not outweigh the significantly detrimental landscape and visual impacts on the local environment and community. The overall scale of the proposed wind farm and its associated infrastructure would accentuate the adverse impacts on the environment and community to a degree which would be unacceptable. Although the applicant has fulfilled the duties required by Sched.9 [to] the Electricity Act by having due regard to those relevant matters and mitigation in the environmental statement, addendum and supplementary environmental information, the environmental impacts of the proposed development would not be acceptable. In a balance of benefits against disbenefits, the proposed development would be contrary to both national planning policy and the local development plan” (para.134).

A

B

C

Accordingly, the report ends with a recommendation that consent should be refused.

D Developments between delivery of the report and issuing of the decision letter

[21] On 11 June 2014 SNH issued a new map in relation to the identification of wild land entitled “Wild land areas 2014”. This should be read with the SNH paper giving advice to the Scottish Government dated 6 June 2014 (Tab.43) which makes clear that it is intended that the wild land areas map of 2014 should be seen as replacing the CAWL 2013 map. It records also that the SNH 2007 guidance would be updated in light of this policy change. Some further clarity on the understanding of what comprises wild land is given in Ch.2 of the paper. It is clear that the guidance is suggesting that the new map is to be used as a strategic planning tool and is the product of a desk-based analytical study. It is noted that individual field assessment would still be required for individual applications (para.5.33).

[22] Almost immediately after the publication of that document, the Scottish Government published the new National Planning Policy—SPP 2014 (SPP 2–Tab.45). A number of new policies are developed within that paper and a specific section on renewable energy with a view to making Scotland a “low carbon place” includes a section about onshore wind. The SNH 2014 map is specifically included as part of the Scottish National Policy. It divides relevant areas into groups. Group 2 includes areas of wild land as places where wind farms may be appropriate in some circumstances. The new policies should be read in conjunction with the third National Planning Framework (Tab.46) which, amongst other matters, reiterates the view that wild land is a nationally important asset.

[23] During the summer of 2014 an issue arose about whether further submissions should be invited from those involved in proposing and objecting to Glenmorie wind farm given that the reporter’s report and recommendation

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had been delivered but Ministers had not reached a decision. On 3 July 2014 correspondence was sent by email to the relevant parties seeking submissions on SPP 2 and the third National Planning Framework (NPF 3) by 18 July.

However, that invitation was retracted in a subsequent email from the Scottish Government on 15 July 2014 (Tab.58). That email correspondence records that the government had now realised that it had not been necessary to ask for further representations in such a situation and that the request had been made in error. The email also indicated that the Scottish Government would not seek further representations on other relevant applications. It is recorded that Ministers had “sufficient information” to determine the petitioner’s application. The position of the second respondent, Highland Council, was that it wanted to make the further representations initially invited, and sought to do so. This was expressed in correspondence (Tabs.47, 56 and 60). One objector, the Mountaineering Council of Scotland, had in fact responded on 7 July 2014 prior to the retraction of the invitation (Tab.50). The petitioner’s response to this situation was, by email from their agents on 21 July 2014, to accept that it was appropriate for no further submissions to be taken into account so long as all other relevant parties were in the same position. It was noted further on behalf of the petitioner that evidence had been led at the inquiry on the basis that all parties knew that the relevant maps in relation to wild land were likely to change (Tab.62). It was not disputed before me that the Scottish Ministers had entertained representations in other cases pending at a similar time including in relation to proposed developments at Sallachie, Allt Duine wind farm and Glen Cassely.

The decision letter

D

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[24] The first respondents’ decision letter is dated 25 August 2014 and contained at Tab.64 of the joint productions. The consultation process and public local inquiry procedure is first set out. Thereafter the reporter’s reasoned conclusions contained within Ch.7 of the report are narrated in full.

Then there is a section dealing with Scottish Planning Policy 2014 and the inclusion of wild land within Group 2 as being areas of significant protection within its table for special frameworks, is noted.

[25] The Scottish Ministers consideration of matters is then set out. It is recorded that Ministers have considered fully and carefully the application, the environmental statement, the addendum and supplementary environmental information, consultation responses, public representations, the findings, conclusions and recommendation of the reporter and all other material considerations. The following significant paragraphs then appear: “Ministers have considered the reporter’s reasoning and conclusions in the context of the new SPP, and are of the opinion that the reporter’s conclusions are still valid for the purposes of this decision. The 2014 SPP is explicit in a way the previous SPP was not in setting out a presumption in favour of development that contributes to sustainable development, but the previous SPP did similarly set out a strong policy position in favour [of] this type of development. Ministers consider that the conclusion the reporter reached that the environmental impacts of the proposed development would not be acceptable remains valid, and because of that are of the view that this development does not represent sustainable development, in particular given the significance and extent of the landscape and visual impacts which the reporter has set out.

“The area of this development now sits largely on wild land areas as shown on the 2014 SNH maps of these areas, where previously it was adjacent to the search areas for wild land (SAWL). The reporter highlighted

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the significant detrimental impact the proposed development would have on the wilderness qualities of wild land in the area around the development.

Ministers have considered the reporter’s conclusions regarding the impact on the wilderness qualities of the area, which remain relevant, in the context of the new SPP and the fact that the prospective site now sits largely in a wild land area in SNH’s 2014 map. Ministers have concluded that, if anything, the wild land impacts are of greater concern in the context of the new map and SPP than they were in the context of the previous SPP and map of SAWLs, and therefore that these considerations only lend weight to a decision to refuse the development. “… Ministers have therefore concluded that the reporter’s conclusion remains relevant that, in a balance of benefits against disbenefits, the proposed development would still be contrary to both national planning policy and the local development plan.

“Scottish Ministers agree with the reporter’s reasoning and conclusions and adopt them for the purposes of their own decision.”

[26] The decision letter concludes with formal notification of the refusal of the application for consent, consequent requirements for publication and reference to the possible right to seek judicial review. The changes in the recently published Scottish Planning Policy and Scotland’s Third National Planning Framework are specifically noted but it is concluded they do not alter the position.

A

B

C

Submissions on behalf of the petitioner

[27] Senior counsel for the petitioner developed the three possible grounds for review set out in detail in the note of argument for the petitioner (No 15 of Process). The first basis on which the first respondents’ decision is challenged is that of procedural unfairness, breach of natural justice and denial of legitimate expectations. It was argued in the note and in oral submissions that it was procedurally unfair for the first respondents to proceed to determine the petitioner’s application without giving consideration to the petitioner’s response to the publication of SPP 2014 and the relevant SNH 2014 map of wild land areas. The SNH wild land-mapping exercise was for the first time afforded express policy recognition in SPP 2014. It was unfair for the first respondents to take considerations in that policy into account as giving rise to “greater concern” without comment or submission from the petitioner. There was nothing to suggest that the first respondents had looked at the materials put before the reporter or analysed whether the new areas on the map were actually wild land, something that SNH make clear has to be done in the development context. A desktop exercise was insufficient. While it was acknowledged that the petitioner’s agents had accepted that there was no requirement for the first respondents to receive further submissions on the new policy, it was still a breach of natural justice to draw adverse implications from new national policy and wild land mapping without having heard from the petitioner because these were new and material factors that had arisen since the submission of the reporter’s report. There had been an initial suggestion in the answers to the petition that the new policy had been a material consideration although it was now said that SPP 2014 and NPF 3 “were not determinative of the first respondents ‘decision”. The only field assessment carried out had been that of the petitioner and it had formed part of the petitioner’s evidence to the inquiry that the CAWL was inaccurate so far as the development site was concerned and should not be relied upon. It was of particular concern to the petitioner that no field work had been carried out relevant to the new map. The first

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respondents were not in a position to conclude that it was less likely that consent would be granted under SPP 2014 without such evidence-based work.

Neither could the court reach such a conclusion. The purpose of the new map was to allow local authorities to prepare development plans, not to use it to give or refuse consent. In the particular circumstances of the timing of the petitioner’s application, the inquiry and the development of the new policy, fairness demanded that the petitioner be heard on the issue. Further, notwithstanding the petitioner’s position, the first respondents considered it appropriate to obtain statements from parties participating in the other s.36 wind farm inquiries where the issue of wild land was a determining issue and that despite indicating in the email of 15 July 2014 (Tab.58) that they would not seek representations in other cases. For example, the proposed development at Allt Duine was refused consent but in the decision it is recorded that further representations following the issue of SPP 2014 were sought, obtained and considered before the decision was made at (Tab.73). It was not disputed that the first respondents required to apply the policy extant at the time of Ministers’ consideration. However the reference in the decision letter to SPP 2014 and NPF 3 and the comment that these “do not alter their decision” suggests that the new policy was used rather as a cross-check against a decision already taken rather than as a decision taken having regard to the reporter’s report and the newly issued policy. Whether the argument was characterised as procedural unfairness or breach of natural justice, unfairness to the material prejudice of the petitioner had arisen.

[28] The second challenge was based on an argument that the first respondents had left material considerations out of account and had given inadequate reasons for the decision. It was argued that the first respondents had failed to have regard to the specifics of the matter of wild land in terms of the new policy SPP 2014. Having relied on the reporter’s description of the implications for wild land that related to what were effectively the superseded SAWLs of 2002, there had been a failure to consider the petitioner’s valid concerns as to the veracity of the SNH mapping exercise. Accordingly the petitioner’s consultants were unable to advise as to: (i) the reasons for their criticisms of the CAWL having been rejected; and (ii) the prospects of obtaining consent for some alternative development and this led to substantial prejudice.

The well-known dicta of Lord Brown in South Buckinghamshire District Council v Porter (No.2) at para.36 was relied upon in relation to the need for intelligible and adequate reasons that would inform a disappointed party of any basis for an appeal or judicial review or other procedure to challenge the decision. In support of the contention that the petitioner’s consultants were unable to advise given the terms of the first respondents’ decision letter reference was made to an affidavit of Anna Webster, environmental consultant lodged at Tab.9. In paras 45–52 of that affidavit the concerns that adviser has about the lack of reasoning and consequent inability to advise on what to do next are set out. The key issue of prejudice, according to senior counsel for the petitioner, was the inability of advisers to tell the petitioner how they could overcome the wild land issue. The giving of good and adequate reasons was all the more important where the new policy was being developed at the time of decisionmaking as in the present case. Further, given that SNH did not object to the development on the basis of any impact on wild land, the lack of objection of the second respondent’s planning committee, at least initially, and the evidence about the baseline effects of the proposed development being provided by the petitioner all militated in favour of a conclusion that the reasons given were wholly inadequate.

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[29] The final head of challenge was described in oral submissions as “methodological error”. It was contended that the reporter fell into error by adopting an inconsistent approach when considering on the one hand the impact on landscape character of the proposed development and on the other the cumulative impact. While it was acknowledged that the reporter was generally aware of the existence of other constructed and consented wind farms in the area, it was submitted that she made a methodological error by omitting to consider the influence of those wind farms upon baseline landscape character.

Some support for this argument was provided again by Anna Webster’s affidavit particularly in paras 59 and 60. The nearest wind farm to the Glenmorie area was said to be Cloire na Cloiche. Reference was made to para.6.12 and Fig.D9 in Appx.D to the landscape and visual report (Tab.34) prepared for the petitioner and to the cumulative plan (Tab.75). It was hard to reconcile the reporter’s references to, “an overriding lack of existing human activity” and “a sense of barrenness and remoteness” with the presence of the existing manmade influences, which had been drawn to the attention of the reporter. It was pointed out also that the decision letter talks of “wilderness” qualities, long thought to be an inapposite expression in addressing wild land character. It was also suggested that it was wrong to conclude that the petitioner’s proposed wind farm development would be visible from the viewpoint at Ben Wyvis (viewpoint, 15 Tab.30). In contrast, three other wind farms are clearly visible from that area. It was difficult to understand why those had been left out of account in considering the importance of the Ben Wyvis special landscape area.

[30] In anticipation of the respondents’ submissions, senior counsel for the petitioner argued that one could not jump to the conclusion that the 2014 map made it less likely that the petitioner’s application would be granted without evidence of that. It remained the position that no adequate explanation was given in the decision letter for the conclusion that the new policy would give rise to even greater concerns in relation to this application than the old. A motion to grant decree of declarator and reduction was made.

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Submissions for the first respondents

[31] The Dean of Faculty moved for the dismissal of the petition. He made four principal general observations. First, he commented that if the petitioner’s argument was that there was a need for site-specific analysis rather than simple reliance on any map in considering wild land, there had been one in this case.

When the first respondents made their decision they had before them findings of the reporter analysing the impact of this particular proposed development on this particular site. It is clear from the terms of the decision letter that they considered all the documents and reports listed in the letter carefully. Their conclusion was to agree and adopt the reporter’s reasoning and conclusions.

The detailed site-specific analysis was in the report itself and the first respondents accepted it. They also had before them the petitioner’s environmental impact assessment. Secondly the decision under challenge is an administrative decision by the Scottish Ministers on a planning matter. It is settled law that questions of planning judgment were for them as decision-makers. Reference was made [to] Tesco Stores Ltd v Secretary of State for the Environment at p.780, where Lord Hoffmann gives the locus classicus of that principle. In considering the petitioner’s application, a balance required to be struck between the interest in promoting renewable energy on the one hand and the interest in protecting the landscape on the other. That balance was exclusively a matter for the first respondents. The recent decision of the Inner House in the case of Loch Hill Wind Farm (Scotland) Ltd v Scottish Ministers was referred to. In that case an

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Glenmorie Wind Farm Ltd, Petitioner (OH)

2016 S.C.L.R.

appeal was taken against a decision of a reporter on behalf of the Scottish Ministers. It also involved a challenge to a decision letter. Lord Malcolm took the opportunity to reiterate some of the basic principles applicable to cases of this kind under reference to the opinion of Lord Gill in Moray Council v The Scottish Ministers. In particular, decision letters are to be read in a straightforward manner recognising that they are addressed to parties well aware of the issues involved and the arguments advanced. Further, issues such as the acceptability or otherwise of landscape or visual impacts of a wind farm constitute “pure questions of planning judgment” which are necessarily subjective to some extent but informed by the reporter’s professional expertise. It is trite that the court cannot interfere with such decisions. The court is concerned only with the legality of the process (paras 16–17). The Dean of Faculty submitted that, like the Loch Hill Wind Farm case, the petitioner’s application raised issues of balancing the benefits of the proposed development in terms of renewable energy generation against arguably unacceptable cumulative visual impacts.

[32] Thirdly, the question that was for first respondents as decision-maker was to pose the question “What is the right decision for this site having regard to the competing public interests?” To answer that required a policy judgment and in reaching the conclusion that they did the first respondents were entitled to accept the reporter’s conclusions as sufficient basis for it.

[33] Fourthly, the changes in policy between the original SAWL’s, the CAWL’s and ultimately the core map published in 2014 did not affect the conclusion on visual impact that the reporter made and was entitled to make.

The reporter had before her the petitioner’s environmental statement and took it into account as one of many factors involved in her consideration. That statement itself (Tab.13) describes the effect of the proposed development on Area A, lying 150 metres to the nearest turbine and categorised as “true wild land”, as “significant”—para.1.47. While the position of SNH was that the incremental attrition of the wild land resource by this proposed development was not of national significance, it was for the first respondents, not SNH, to take the decision. In any event, it would be incorrect to suggest that SNH were unconcerned about the additional cumulative impact on wild land of further development in the area.

[34] Turning to the report itself (Tab.40), the Dean of Faculty pointed out the detail with which the reporter set out the parties’ submissions in Ch.2 and the comprehensive conclusions and recommendations in Ch.7. It could not be said that the reporter did not have a basis for the conclusion that she reached or that the first respondents were not entitled to accept her assessment and findings. Any suggestion that the reasons given by the first respondents were inadequate had to be tested in context. The parties were well aware of the issues in the application and the decision letter had to read in light of that. The impact on wild land was always the issue with this application. The petitioner knew the case it had to meet and what that central issue was. The reporter was well aware of the other wind farms in the area in referring to the cumulative impact on the landscape of the proposed development at para.7.128 of Tab.40.

The issue of the cumulative impact on the landscape was not restricted to the issue of what was and what was not wild land. The impact on the landscape character is explained fully in the report. It is plain from the terms of para.7.10 of her report that the reporter took into account all of the submitted material, the oral evidence and crucially, she had undertaken accompanied and unaccompanied site visits. It could never be suggested that she was unaware of the position with other consented wind farm developments. It was plain from reading paras 7.2, 7.14, 7.19 and 7.20 of the report that the reporter was

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relying on her own experience, having visited the site, when she concludes that the overall impact on the openness, vastness and remoteness of the area through the proposed development would be significant and adverse. Through her visits she could see that the other wind farms had a relatively limited impact while the petitioner’s proposals would, both individually and cumulatively, have an unacceptable impact in the area. So far as the wild land issue was concerned the starting-point was para.7.36 of the report. The reporter’s conclusion was that the development could impact up to 15 kilometres in to the heart of the wild land area. This was a significant conclusion that the reporter was entitled to reach and the first respondents were entitled to accept.

The cumulative impacts of the proposed development are addressed separately and in detail at paras 7.48, 7.49, 7.57 and 7.59. In that last paragraph the significant effects that the development would have on the three viewpoints listed are acknowledged.

[35] The all-important balancing exercise that the reporter had to carry out can easily be identified in para.7.134 of the report. The first respondents adopted that reasoning in full. They accepted both the factual findings of the reporter on the effect on the landscape character and the individual and cumulative impact on wild land in the area. Those two aspects formed the base information when the first respondents came to make their own decision in light of the new policy.

[36] It was indisputable that the SPP 2014 sets out in more concrete terms the protection for wild land by recording three specified groups or areas of wild land as shown on the 2014 SNH map. Under the new policy it has to be demonstrated that the effects of any proposed development on the quality of the area concerned can be overcome. While the policy gives greater clarity on the classification or characterisation of land as wild land or not, wind farms are not precluded by the policy in principle, but have to be justified. Accordingly, the current policy tightens up the protection to wild land areas and the new map illustrates clearly that the petitioner’s proposed wind farm would be at least partly situated directly on wild land. This is because some land not previously caught by the SAWL was now included in the 2014 map. It was inconceivable that any submission could have been made that would change the decision in favour of the applicant standing the reporter’s conclusion based on SAWL rather than the 2014 map. It was broadly accepted that the question of whether an area would be classified as wild land is now determined by that more recent map.There was accordingly no basis for the petitioner’s procedural unfairness point. In any event, as a general rule there was no requirement on the first respondents to consult further when the new policy was issued after the submission of the reporter’s report. It was clear from the correspondence (Tab.62) that the petitioner’s representatives accepted that they had no right to insist on making further submissions. The decision letter contained an intelligible articulation of the first respondents’ position. Criticisms of terminology, such as the letter referring to “Wilderness qualities of wild land” rather than the reporter’s correct term of the use “wildness” would not affect the substance of the decision. The key point was that having considered the reporter’s conclusions those remained relevant in terms of the new policy which intensifies the protection for wild land. Far from there being anything in the new policy that would justify setting the reporter’s conclusions aside, it was clear that the wild land impacts of the proposed development would be of greater concern in the context of the new map and so that it is stated in terms in the decision letter. It was not a question of simply relying on a map, it is the association of the map with the new planning policy that was significant.

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634 A

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Glenmorie Wind Farm Ltd, Petitioner (OH)

2016 S.C.L.R.

[37] Under reference to Hopkins Development Ltd v Secretary of State for Communities and Local Government at paras 47–48 and 85–86, the Dean of Faculty submitted that in the absence of a statutory procedure, the question of whether to invite further submissions was a matter of discretion for Ministers, subject to the need to operate fair procedure. The court can intervene and quash the decision only if there is procedure of unfairness of a type that materially prejudices one of the parties involved.The first respondents were entitled to conclude that they did not need or want further submissions following the issue of the new policy. They had the evaluative comments of the reporter and everything they needed in order to apply their own new policy SPP 2014. So far as the alleged inconsistency point was concerned, the first respondents’ position was that submissions were sought in other cases because they were different and in the exercise of their discretion they accordingly decided to entertain such further submissions. The point about lack of consistency on this would only work if the petitioner had been able to show there were no relevant distinguishing features between the petitioner’s application and the others. In any event, if a decision-maker erroneously sought further submissions for one application but not another it could not affect the outcome of the present case. The other applications concerned were not the subject of these judicial review proceedings and accordingly the court should be unconcerned about them. The only question to be answered is whether what was done in relation to further submissions was unfair to the petitioner in this case. That ought to be answered in the negative.

[38] So far as the reasons challenge was concerned it was not for an environmental adviser to decide whether or not the reasons given by the first respondents were intelligible, that was clearly a matter for the court. While the decision letter is relatively short, it specifically adopts the report which the petitioner would have received effectively simultaneously with the decision letter. In the absence of any lack of intelligibility in what the first respondents express in the decision letter the reasons challenge could not stand.

[39] So far as the point about the Ben Wyvis special landscape area was concerned, the petitioner’s argument was misconceived. The reporter had dealt properly with this issue at paras 726–728 of the report. Ben Wyvis lies south of the proposed development. The wind farms claimed by senior counsel to the petitioner to be visible from the Ben Wyvis viewpoint were, unlike the proposed development, not to the north of Ben Wyvis. For all the reasons stated in the note of argument for the first respondents which was adopted the petition should be dismissed.

Submissions for the second respondents the Highland Council

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[40] In a succinct and helpful submission, Mr Findlay submitted that the petition should be dismissed. He adopted his own note of argument and the oral and written submissions for the first respondents. He reiterated the important statements of the correct approach made by Lord Gill in Moray Council v Scottish Ministers at paras 28–32. In particular the dicta therein talks of the dangers of an over-detailed textual analysis of decisions of this type and confirmed that documents such as decision letters should be read as a whole.

[41] Mr Findlay made four main points in answer to the petitioner’s arguments on the wild land issue. First, it was incontestable that the new policy, SPP 2014, has intensified or added to the protection for wild land. An examination of the chronological development of policy on this issue puts beyond argument that the most recent policy adds to protection for wild land rather than detracts from it. If an application conflicted with policy on wild

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land in SPP 1 it would undoubtedly follow that there was such a conflict if considering an application under SPP 2. Protection for wild land now has national significance whereas previously it had only local or regional significance. Secondly, it was important to note that the petitioner had been unable to criticise any of the reporter’s conclusions on the wild land issues.

Those conclusions had been adopted in full by the first respondents. Thirdly, emphasis had been placed on the lack of objection by SNH but such a lack of objection meant nothing more than that in the view of that organisation the impacts of the proposed development were not regarded by them at the time as being of national significance. SNH did have concerns about the proposed development and those concerns were before the reporter. Fourthly, there was not as much of a dispute about the categorisation of wild land areas at the inquiry as might have been thought at the petitioner’s submissions. Using the classification of areas in the environmental statement, it was always the case that Area A was wild land. There was some dispute in relation to Areas B and C. In any event from 2014 it has been accepted that the most recent map is a definitive on classification. At the time of the reporter’s consideration and recommendations, Highland Council and the petitioner had agreed that classification should be in terms of SAWL’s not CAWL’s. The issues at the inquiry had related to Areas B and C as even under the emerging policy represented by CAWL parts of those areas would have been wild land. This lent weight to the “compelling logic” of the first respondents’ position. If the petitioner could not obtain consent under the previous policy, then given that it was indisputable that the protection for wild land is enhanced under the new policy, it was impossible to see how the petitioner’s position could ever be strengthened. The situation would be different had SPP 2014 reduced the significance of wild land to local interest only.

[42] Mr Findlay added to the Dean of Faculty’s submissions on the procedural unfairness aspect by dealing with the facts of the consistency point.

He submitted that there were material differences between the petitioner’s application and others where further submissions had been sought. For example in Allt Duine there had been an objection and an inquiry that was held long before SPP2 was issued. SNH had then changed its position and objected to the application and the reporter had recommended granting consent to the application (see Tab.73). So far as Sallochie was concerned, Highland Council had not objected to that application and so there had been no requirement for a public inquiry and the reporter’s unit had not been involved. While SNH had ultimately objected that was only after the policy change (see Tab.67a). Finally the third relevant application, Glen Cassley, had involved no objection at all and accordingly no reporter was involved (Tab.67c).

These differences easily justified a difference in approach on how discretion might be exercised in terms of seeking further submissions.

[43] So far as the landscape matter was concerned, Mr Findlay made reference to the report from Optimised Environments prepared for the petitioner (Tab.34). It was noted that the report’s description of the landscape appears to have been directly taken from 1999 SNH assessment. The reporter’s use of the landscape character assessment (paras 7.12–7.19) was consistent with the statement of common understanding between the Highland Council and the petitioner (Tab.35) that the relevant landscape character baseline was the 1999 land character assessment of SNH, which found the sensitivity of both of the relevant character areas to be high in overall terms. The reporter applied the baseline description and then considered whether she agreed as regards the particular site of the proposed wind farm. In other words the land

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2016 S.C.L.R.

character assessment was the area generally but was then specified by the reporter for this particular proposed development. So at the stage of landscape character assessment the issue of other existing wind farms was entirely irrelevant. The reporter subsequently refers to the existing wind farms in the appropriate context (para.7.20). The issue in relation to Cloire Na Cloiche was whether it would be seen with the proposed Glenmorie development or stand alone. There was a dispute about that at the inquiry and the reporter concluded that the proposed development would extend the visual effects westwards, in other words it would compound the already existing visual impacts of Cloire Na Cloiche.

[44] Having adopted the Dean of Faculty’s submissions on the substance of the decision letter (Tab.64), Mr Findlay made further points about the section on SPP 2014. It was clear that three aspects of that policy are new. First, there is the presumption in favour of sustainable development. Secondly, there is the restriction on development in remote and fragile areas. Thirdly, and distinctly, there is the enhanced protection for wild land. It is clear from the letter that the decision-maker goes through each of these new issues and considers them in turn. Having done that the conclusion is that the reporter’s findings and recommendations remain relevant. If the first respondents were prepared to refuse the application on the old map it would have been a complete waste of time and money to invite submissions on the new map and policy.

Discussion

F

[45] I turn first to the procedural unfairness/breach of national justice/denial of a legitimate expectation argument. The question is whether there was any requirement, as a matter of fairness, on the first respondents to seek further submissions from all the various parties when the new policy and wild land mapping was issued in 2014 after the reporter had submitted her report. It was not contended by the petitioner that there was any legal obligation as such to do so. The initial overture to parties to provide written submissions following the publication of SPP 2 and NPF 3 was expressed as an invitation (email from the Energy Consents and Deployment Unit (ECDU) of the Scottish Government dated 3 July 2014 (Tab.48). It was made clear in a subsequent email of 8 July that the invitation related only to the Glenmorie application (email of 8 July 2014, Tab.53). While one or two parties attempted to make representations before the invitation to do so was withdrawn, it is clear from the first respondents’ email of 15 July 2014 that any such additional representations would not be taken into account and that email also clarifies the procedural stage reached, namely that the reporter had concluded and submitted her report to the ECDU, which was in the process of considering a recommendation to be made to the Ministers. The correspondence goes on: “The ECDU recommendation will take account of the reporter’s report and changes in the policy position since the inquiry closed. This is the procedure which has been adopted consistently in all s.36 cases.”

G

[46] It is then explained that as the Scottish Government and Scottish Ministers were fully aware of the terms of their own policy documents and implications for s.36 cases, there was no evidential requirement to refer the Glenmorie case back for further inquiry or to allow additional representations to be made. It was on receipt of that correspondence that the QC representing the petitioner at the inquiry (also a partner in the firm instructed by Glenmorie) replied by email of 21 July 2014 (Tab.62. The pertinent parts of that email are in the following terms:

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637

“My clients Glenmorie Wind Farm Ltd were and remain content to accept your ruling on further representations. As you have said SPP 2, and so far as relevant, NPF 3, are the creations of the Scottish Ministers (and in the case of NPF 3 the Scottish Parliament). The Ministers will know how to apply their own policies.

“However, my clients would not wish to be disadvantaged if the representations of other parties and letter from THC were to be taken into account by the Ministers. It would be fair for the applicant to have a right of reply. Representations made by other parties do in some cases venture beyond the procedural point being addressed into representations on the wild land issue.”

[47] Three matters relevant to my decision arise from that email. First, it is abundantly clear that having taken legal advice, the petitioner was content that the first respondents were entitled to decide not to consider any further representations before reaching a decision. Secondly, while the point is made that there would require to be fairness as between the parties and that the petitioner would seek a right to reply if the Highland Council’s representations were to be taken into account, there was no suggestion made to me that the first respondents had done anything other than ignore any such purported further submissions having given a clear statement that they would not consider them. Thirdly, it is apparent that the concern being expressed on behalf of the petitioner was that those attempted further representations strayed into the substantive wild land issue rather than dealing solely with what is termed “the procedural point”, namely the issue of whether the new policy required an invitation to make further submissions. Taking these points together, it seems to me that the petitioner was fully aware of the approach that, on reflection, the first respondents intended to take and expressed contentment with it. In the absence of any suggestion that any other party’s proposed further submissions were in fact taken into account, the result was that which would have subsisted had the initial invitation of 3 July never been tendered.

[48] Accordingly, it is difficult to conclude there was any unfairness, far less unfairness resulting in material prejudice to the petitioner. As with the other parties, there was a short period when the petitioner thought that there was an opportunity to make further representations. That opportunity came to nothing when the first respondents decided that the invitation should be withdrawn. All parties were initially advised that further representations would be considered and can therefore be regarded as equally inconvenienced by the change in position. Some had formulated representations. Such inconvenience does not, however, equate with material prejudice of the type referred to by Jackson LJ in Hopkins Development Ltd v Secretary of State for Communities in Local Government at para.62. The petitioner does not and cannot suggest that the submissions it was denied the opportunity of making would have been to the effect that the new policy and mapping were favourable to their application.

It was not open to the petitioner to challenge the policy itself or the first respondents’ ability to take it into consideration in making the decision of 21 August 2014.

[49] So far as what was termed the “consistency point” is concerned, I have noted the submissions of Mr Findlay that the other applications in respect of which further submissions were ultimately sought and considered differed in their facts and circumstances. While I have no reason to doubt that submission, it is not for me to comment on the facts and circumstances of other applications and procedures undertaken within them and perform some comparative

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Glenmorie Wind Farm Ltd, Petitioner (OH)

2016 S.C.L.R.

exercise. It is sufficient for the purposes of this case to consider whether it was unfair for the first respondents to conclude that they had all the necessary information before them to allow them to reach a properly informed decision or whether they required to seek further representations on the Glenmorie application. I have reached the view that the first argument made on behalf of the petitioner is not well founded. It is accepted that a decision made by those in the first respondents’ position following an inquiry is fundamentally an administrative decision: Bushell v Secretary of State for the Environment, Lord Diplock at pp.101–102. Lord Diplock there gives examples of actions on the part of such a decision-maker that would be unfair, such as hearing from one side after the inquiry is closed without letting another side know, or accepting from third parties fresh evidence which supports one side’s case without giving the other side an opportunity to answer it. However, there is no obligation to seek views on information or advice coming from within the decision-making body itself. The new policy (SPP 2014) fell into that category in this case.

The first respondents dealt with all parties involved in an even-handed manner after SPP 2014 was published. Against the factual background narrated above, there was no procedural unfairness that could be said to have materially prejudiced the petitioner’s position.

[50] The second challenge, that the first respondents left material considerations out of account and /or had given inadequate reasons for their decision, must be considered in light of the settled law on this issue. In South Buckinghamshire District Council v Porter (No.2) at para.36 Lord Brown of Eaton-under-Heywood summarised the essential requirements as follows: “The reasons for a decision must be intelligible and they must be adequate. They must enable the reader to understand why the matter was decided as it was and what conclusions were reached on the ‘principal important controversial issues’, disclosing how any issue of law or fact was resolved. Reasons can be briefly stated, the degree of particularity required depending entirely on the nature of the issues falling for decision … .”

[51] The nature of the decision in this case is a decision letter in a planning matter. In Moray Council v The Scottish Ministers, Lord Gill emphasised that such decision letters are to be read in a straightforward manner recognising that they are addressed to parties well aware of the issues involved and arguments advanced. That dicta was recently approved by the Inner House in Loch Hill Wind Farm (Scotland) Ltd v Scottish Ministers at para.16.

[52] It was contended that the first respondents’ decision letter left the petitioner’s consultants unable to advise properly on why some of their criticisms in relation to the wild land issue had been rejected and what else they could do to obtain consent for some alternative. However, the first and most obvious point on this issue in my view is that the decision letter has to be read together with the reporter’s report, a copy of which was made available, contemporaneously with the decision letter, to all parties. The reporter sets out in detail all of the submissions made by the various parties on the issues in controversy in Ch.2 of her report. These are all addressed and detailed conclusions and recommendations are elaborated in Ch.7. The issues between the parties were well focused. The first was the significant impact of the proposed development on the landscape character of the area involved. Then there was the issue of the proximity of the site to wild land both individually and taking into account cumulative impacts having regard to other wind farms in the area. I have referred earlier in this opinion to the various passages in the report that deal with these issues of contention. Each issue is addressed fully

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and the reporter’s conclusions explained. For example, the reporter did not accept the opinion offered on behalf of the petitioner in relation to the extent of the impact the proposed development would have on wild land to the west of it (see para.7.36 of Tab.40). This specific significant adverse and cumulative impacts of the development are also enunciated (see para.7.49). The criticisms made on behalf of the petitioner at the inquiry in relation to CAWL’s are acknowledged, but the reporter makes clear that in light of the ongoing consultation exercise the established set of SAWL’s was to be the primary focus in considering the wild land aspects of the proposal (para.7.35).

[53] I agree with the submission made by the Dean of Faculty that there is no lack of intelligibility at all in what the first respondents state in the decision letter.

The reporter’s extensive report, based on the material submitted to her, the submissions made at the inquiry and her conclusions from unaccompanied and accompanied site visits, was accepted and adopted in full. The first respondents might have required to give more detailed reasons had they disagreed with the conclusions of the reporter, given the detailed and comprehensive analysis provided by her. The reference in the decision letter to “wilderness” rather than “wildness”, the latter term being more apposite and appearing in the report, is a semantic point of no real substance given the wholesale adoption by the first respondents of the reporter’s report. To the informed reader, as the petitioner was, a fair reading of the report and the decision letter together would signal very clearly that the contention that the significant visual impacts of the proposed development were acceptable had been rejected. The conclusions of the reporter in relation to the controversial wild land issue are equally clearly stated (see for example para.7.128).

[54] So far as leaving material considerations out of account is concerned the petitioner claims that there was a failure to have regard to the specifics of wild land in terms of the new policy. The planning consequences of the newly adopted National Planning Policy on Wild Land and the implications that arose as a consequence of the proposed site being identified as an area of wild land within SNH 2014 map were said to be material considerations. The first respondents ought to have ensured that they understood the petitioner’s position on them. However, it having been conceded that the respondents were in a position to understand and apply their own policy, it is difficult to understand this criticism. The acknowledged consequence of part of the proposed development being within an area of wild land as identified by the new 2014 map is that its impact on wild land could only be greater than previously. This is the “compelling logic” referred to by Mr Findlay. The petitioner cannot gainsay that logic or suggest that the new policy does not enhance the protection for wild land.While it was argued for the petitioner that evidence would be required before any conclusion could be reached that the policy in the 2014 map made it less likely that the application would be granted, it seems to me that one cannot ignore all of the material that was before the first respondents when they came to make a decision in light of the new policy. Standing the conclusions of the reporter who used SAWL’s as a guide together with the site-specific analysis undertaken, I cannot conclude that the petitioner’s position on the new policy and map was a material consideration that ought to have been taken into account.

[55] The last contention for the petitioner was that the reporter’s approach to the impact of the proposed development on landscape character was methodologically erroneous. Accordingly, as a result of error she advised Ministers that the said impact was unacceptable. In that respect the inquiry report was misleading. The first part of this discussion focused on whether the

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2016 S.C.L.R.

landscape character assessment published by SNH in 1999 was out of date given that since its publication a number of wind farm schemes in the relevant area come into existence or were at least consented to. However, as Mr Findlay pointed out, the reporter’s use of the 1999 landscape character assessment (paras 7.12–7.19) was entirely consistent with the statement of common understanding of the Highland Council and the petitioner (Tab.35) that the relevant landscape character baseline was the 1999 assessment. The landscape character assessment was still relevant in a descriptive sense and as a benchmark from which the reporter could then consider the proposed development both individually and in terms of cumulative impact. The reporter makes sufficient reference in the report to the existing or consented wind farms in the area. One example was the dispute in relation to Cloire na Cloiche.The reporter expressed her conclusion on the matter as follows: “Whether or not the proposed wind farm would be seen in conjunction with Cloire na Cloiche, it would still extend the length and magnitude of wind farm views considerably and have an additional cumulative impact on this sensitive area of wild land. Cloire na Cloiche by itself would give the impression of a small compact wind farm some distance away, but the cumulative impact of the proposed wind farm would be to introduce a large-scale, elongated wind farm some 8 kilometres nearer. I, therefore, consider that the proposed development would have a significant and adverse cumulative effect on wild land particularly to the east of Beinn a’ Chaistail” (para.7.58).

[56] The reporter had already recorded in the context of concluding that the impact of the proposed development on the landscape character of the area would be significantly detrimental that the previous approval of other wind farms in the surrounding area did not alter her conclusion (para.7.20).

[57] Throughout the report, appropriate reference is made to the existence of other wind farms. Accordingly, it cannot be properly suggested that her knowledge and understanding of the area was somehow out of date. In my view it is not erroneous or inconsistent to describe the key characteristics of the landscape character of the site area as including “openness, vastness and remoteness” (para.7.19) while acknowledging in the context of the particular proposal, the cumulative impact it would have when seen in conjunction with other wind farm developments nearby. Accordingly, I disagree that the report evidences some methodological error of a material kind on the part of the reporter that misled the first respondents when they adopted her report and made the decision that they did.

[58] It is clear from the papers lodged in this case and the submissions made to me that the petitioner, having submitted a detailed and subsequently amended application and supporting environmental statement for the construction of this wind farm, is aggrieved at the decision to refuse permission.

That grievance is perhaps exacerbated by knowledge of other consented wind farm developments in the area. However, the decision sought to be reviewed is indisputably an administrative decision by the first respondents on a planning matter, judgments about which were within their exclusive province (Tesco Stores v Secretary of State for the Environment at p.780, Lord Hoffmann).

In Moray Council v the Scottish Ministers, Lord Gill clarified that issues such as the acceptability or otherwise of landscape or visual impacts of a wind farm were included in examples of “pure questions of planning judgment” which are necessarily subjective to some extent, but informed by a reporter’s professional expertise. In approving that dicta recently, the Inner House issued a reminder, in Loch Hill Wind Farm (Scotland) Ltd v Scottish Ministers that, “It

09/11/16 12:39 PM

2016 S.C.L.R.

Glenmorie Wind Farm Ltd, Petitioner (OH)

641

is trite law that the court cannot interfere with such decisions. The court is concerned only with the legality of the process.�

[59] There are some parallels between the issues in this case and the type of challenge made in the Loch Hill Wind Farm case. Notwithstanding the eloquence of the submissions made by senior counsel for the petitioner, I can detect no procedural unfairness, illegality, lack of reasoning or methodological error that might justify reducing the decision intimated on 21 August 2014. The reporter’s analysis was comprehensive, well explained and reached after obvious careful consideration of both the submissions made to her and the accompanied and unaccompanied site visits she undertook. The first respondents were in turn entitled to rely on the substantial body of work the reporter had undertaken in reaching her conclusions and recommendations in making their decision.

Nothing in the new policy that emerged in the late summer of 2014 could have resulted in a decision more favourable to the petitioner being taken.

A

B

Decision and Disposal

[60] For all of the reasons given above, each of the three challenges made by the petitioner to the decision of 21 August 2014 fails. I will sustain the pleasin-law for the respondents and dismiss the petition, reserving meantime all questions of expenses.

For the petitioner: Muir QC, M Mackay, instructed by Eversheds LLP, Solicitors, Edinburgh.

For the first respondents: The Dean of Faculty W J Wolffe QC, M Ross, instructed by Scottish Government Legal Directorate, Edinburgh.

For the second respondents: Findlay, instructed by Harper Macleod LLP, Solicitors, Edinburgh.

C

D

E

F

G

5304.indd 641

09/11/16 12:39 PM

A

B

C

D

E

F

G

5304.indd 642

09/11/16 12:39 PM

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SCOTTISH CIVIL LAW REPORTS

Immigration— Leave to remain—Provision of evidence Nawaz, Petitioner (IH)

October 2016 2016 S.C.L.R. 485−642

New grounds of appeal Advocate General for Scotland v Murray Group Holdings Ltd (IH) 485

2016 S.C.L.R. 485–642

Scottish Civil Law Reports Edited by Sheriff Michael J Fletcher Advocate General for Scotland v Murray Group Holdings Ltd (IH) 485 EM v AM (IH) 571 Esso Petroleum Co Ltd v Scottish Ministers (OH) 539 Glenmorie Wind Farm Ltd, Petitioner (OH) 619

*657945*

KR v Stirling Council (IH) 557 McSparran McCormick, Appellants (IH) 585 Nawaz, Petitioner (IH) 603 Secretary of State for Work and Pensions v Robertson (IH) 522