Scottish Civil Law Reports, issue 4, August 2016

Contract— Breach of contract—Relevancy PIP3 Ltd v Glasgow City Council (OH)

361

Harassment— Competency—Joint application—Course of conduct Green v Chalmers (Sh Ct) 413

Human rights— Legislative competence—Named person Christian Institute v Lord Advocate (SC)

448

Partnership— Construction of contract—Competing leaver Bishop v 3i Investments plc (IH) 398 Process— Competency—Harassment—Joint application Green v Chalmers (Sh Ct) 413 Reparation— Employer’s liability – Failure to effect employer’s liability insurance Campbell v Gordon (SC) 434

SCOTTISH CIVIL LAW REPORTS

Heritable property— Standard security—Repossession of residential property Swift Advances plc v Martin (IH) 385

August 2016 2016 S.C.L.R. 361−484

Mental health—Personality disorder with risk to public Johnstone, Petitioner (OH) 370

2016 S.C.L.R. 361–484

Scottish Civil Law Reports Edited by Sheriff Michael J Fletcher Bishop v 3i Investments plc (IH) Campbell v Gordon (SC) Christian Institute v Lord Advocate (SC) Green v Chalmers (Sh Ct)

*657944*

398 434 448 413

Johnstone, Petitioner (OH) 370 PIP3 Ltd v Glasgow City Council (OH) 361 Swift Advances plc v Martin (IH) 385

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A COURT OF SESSION Outer House

1 September 2015

Lord Woolman PIP3 LTD

Pursuer

B

against GLASGOW CITY COUNCIL

Defender

Contract—Breach of contract—Relevancy—Option agreement— Whether defenders entitled to rescind—Whether defenders in breach of contract The pursuer became interested in a brownfield site in the east end of Glasgow owned by the defender. The site lay in an area that was subsequently designated for the Commonwealth Games. The pursuer wished to construct a hotel and car park on the site and entered into negotiations with the council to acquire the site. The negotiations centred on an option agreement linked to the grant of planning permission. The pursuer was concerned about the environmental condition of the property because it required external funding of about £25 million and lenders generally require assurances about the condition of a site.

Over the period from 2006 to 2011 investigations showed that the site was relatively free from hazardous waste but in 2011 a further report showed that a large quantity of earth had been deposited on the property and investigations showed that over 30,000 tonnes of spoil had been placed on the site from the construction of other facilities in the area.

In 2011 the pursuer signed an option agreement giving it an exclusive option to purchase the property if it exercised the option within three months of planning permission being granted. The council undertook to provide a site waste management plan (SWMP) and a materials management plan (MMP) as soon as reasonably practical after the effective date, which was the date of final signature. No later than the settlement date the defender had to remove the waste from the site under the supervision of the remediation consultant.

The pursuer had to pay the initial purchase price (IPP) on the settlement day and failure to pay gave the defender a right to rescind. After the settlement date the pursuer had to carry out groundworks as soon as reasonably practicable and following the groundworks the defender had to procure that the contractors and the remediation consultant would deliver collateral warranties to the pursuer.

The defender had the spoil removed and the surface of the original soil skimmed to a depth of 600 mm. Just over a year after the conclusion of the agreement the pursuer exercised the option with a final settlement date in April 2013. Prior to settlement the pursuer asked the defender to provide copies of the SWMP and the MMP. The defender replied that it had no legal obligation to deliver them at settlement. The pursuer did not pay the IPP and the defender rescinded the agreement.

The pursuer raised an action claiming damages calculated on the estimate of the amount of the profit it would have made if the development had gone ahead on the basis that the defender failed to provide the SWMP and MMP and the collateral warranties. The action was based on breach of contract and on the basis that by failing to disclose the deposit of the hazardous material the defender beached the obligations of good faith and negligently misrepresented

C

D

E

F

G

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the position. Under the second head the pursuer sought the abortive costs that it incurred in connection with the project, including professional fees.

The defender pled that the breach of contract case was irrelevant and counsel for the defender argued that the defender was entitled to rescind in the circumstances and that on the basis of its pleadings the pursuer would not have carried out the development. He also argued that the pursuer’s pleadings were lacking in specification. The pursuer argued that a proof before answer should be allowed.

Counsel for the pursuer argued that the agreement did not require the pursuer to make payment on the settlement date because the defender was in material breach of contract by not delivering the documents.

Held (1) that having regard to the wording of the agreement the payment of the IPP was the hinge of the transaction and the pursuer’s rights depended on its fulfilling its obligation to pay and unless and until that that had occurred the defender had no obligation to deliver the collateral warranties, together with the disposition and the title deeds (para.41); and (2) that neither of the two factors mentioned by Lord Cooper in Smart v Bargh was present in the instant case and the instant case was one of the “extremer types of case” over which the court should have exercised supervision and the pleadings indicated that the instant case was a “no transaction” case and the circumstances justified the conclusion that the pursuer could claim only for abortive costs (paras 52–55) and claim for breach of contract dismissed.

Cases referred to:

D

E

AMA (New Town) Ltd v Law [2013] CSIH 61; 2013 S.C. 608; 2013 S.L.T. 959 Clarke v Edinburgh and District Tramways Co Ltd, 1914 S.C. 775; (1914) 2 S.L.T. 39 London & Caledonian Marine Insurance (1867) 5 M. 982 Macari v Celtic Football and Athletic Co Ltd, (IH) 2000 S.C.L.R. 209; 1999 S.C. 628; 2000 S.L.T. 80 Maroney v Hugman, 1997 S.L.T. 240 Morrison’s Executors v Randall, 1986 S.C. 69; 1986 S.L.T. 227 NyKredit Mortgage Bank plc v Edward Erdman Group Ltd (Interest on Damages) [1997] 1 W.L.R. 1627; [1998] 1 All E.R. 305 Royal Bank of Scotland plc v Harper McLeod, (Sh Ct) 1999 S.C.L.R. 781; 1999 S.L.T. (Sh Ct) 99 Smart v Bargh, 1949 S.C. 57; 1949 S.L.T. 91.

The full circumstances of the case and the arguments of counsel are to be found in following opinion of the Lord Ordinary which was issued on 1 September 2015.

LORD WOOLMAN

F

Introduction

[1] Glasgow City Council (the council) owns a brownfield site in the East End of Glasgow (the property). It lies in an area designated for the 2014 Commonwealth Games. Located nearby are the Athletes Village, the Sir Chris Hoy Velodrome and the Emirates Arena, formerly known as the National Indoor Sports Arena.

Background

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[2] Several years prior to the Games, PIP3 Ltd (PIP3) became interested in acquiring the property. It wished to construct a hotel and car park on the site,

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which extends to about 4.6 acres. PIP3 entered into negotiations with the council to acquire the property. As is standard in transactions of this type, the discussion focused on an option agreement linked to the grant of planning permission.

[3] PIP3 regarded the environmental condition of the property as a key factor in its plans. The state of the soil had a significant bearing on the feasibility and profitability of the development. In particular it affected the availability of finance. PIP3 required external funding of about £25 million to carry out the project. Lenders generally require assurances about the condition of a site, supported by collateral warranties.

[4] Between 2006 and 2011, PIP3 instructed various investigations to be carried out. They disclosed that the property was relatively free from hazardous waste.

[5] In 2011 PIP3 received a survey report from the council. On comparing it with a 2006 report, PIP3 noticed that there was a substantial quantity of extra earth on the property. It contacted the council, which confirmed that between June 2009 and January 2010, at least 33,840 tonnes of spoil had been deposited there. As I understand matters, the spoil derived from the construction of the other Commonwealth Games facilities in the vicinity.

[6] In late 2011 PIP3 and the council signed an option agreement (the agreement). It is dated 18 and 24 November and 9 December 2011 and was registered in the books of Council and Session on 19 January 2012. It was subsequently varied on three occasions: twice in 2012 and once in 2013.

[7] The essential terms of the agreement are as follows: In return for payment of £1, the council granted PIP3 an exclusive option to purchase the property. (ii) PIP3 had to exercise the option within three months of the grant of detailed planning permission. (iii) The effective date was the date of final signature – 9 December 2011. (iv) As soon as reasonably practicable after the effective date, the council had to instruct a remediation consultant to prepare a site waste management plan (SWMP) and a materials management plan (MMP). (v) Not later than one month after the effective date, PIP3 required to provide the council with ground level drawings. (vi) The settlement date was 15 working days after PIP3 exercised the option. On that date PIP3 had to pay the initial purchase price (IPP) of £1.425 million. (vii) In the event of non-payment, the council had the right to rescind. (viii) Not later than the settlement date, the council had to instruct the initial site preparation works. They included the removal of inert, non-inert, and hazardous waste under the supervision of the remediation consultant in accordance with the SWMP and MMP. (ix) After the settlement date PIP3 had to carry out the groundworks as soon as reasonably practicable. (x) Following completion of the groundworks, the council would procure that the contractor(s) and the remediation consultant would deliver collateral warranties to PIP 3. (xi) Both parties were subject to obligations of good faith.

A

B

C

(i)

[8] Following the conclusion of the agreement, the council instructed contractors to remove the spoil and also to “skim” the underlying soil to a

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E

F

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depth of 600mm. The works took place between January and March 2012.

The contractors removed a total of 56,812 tonnes of material from the property, of which 18,859 tonnes were hazardous waste.

[9] Just over a year after the conclusion of the agreement, PIP3 exercised the option. The notice is dated 18 December 2012. The original settlement date was early January 2013, but the council extended it more than once and it became 11 April 2013.

[10] On 12 February 2013, PIP3 asked the council to provide it with copies of the SWMP and MMP. On 20 February, the council replied to the effect that it was obtaining those documents, but that it was “under no legal obligation” to deliver them at settlement.

[11] PIP3 did not pay the IPP on the settlement date. It maintains that it was not obliged to do so, standing the council’s failure to provide copies of the SWMP and the MMP. On 5 June 2013, the council delivered copies of those documents to PIP3. As PIP3 still did not pay the IPP, the council rescinded the agreement on 4 July 2013.

Factual issues

[12] There are three key conflicts of fact about the hazardous waste material.

First, PIP3 contends that during the period of about two years that it was present at the property, contaminants leached into the soil. That materially and adversely affected its environmental condition. The council disputes that assertion. It maintains that the removal works returned the property to the same condition as prior to the deposit.

[13] Second, PIP3 avers that it only learned about the hazardous material in February 2013 by speaking to contractors involved in carrying out works at the Commonwealth Games site. The council offers to prove an earlier knowledge date. It states that PIP3 was aware that the deposit contained the hazardous material from July 2011.

[14] Third, there is the question of what PIP3 would have done if it had known about the presence of the hazardous waste material. As discussed below, it has conflicting averments on this point.

Grounds of action

E

F

[15] PIP3’s principal ground of action is breach of contract. It claims damages of £15,372,790 on the basis that the council failed to provide (a) the SWMP and MMP, and (b) the collateral warranties. The sum sought by way of damages represents PIP3’s estimate of the profit it would have made if the development had gone ahead.

[16] In the alternative PIP3 alleges that by failing to disclose the deposit of the hazardous waste, the council: (i) breached its obligations of good faith; and (ii) negligently misrepresented the position. Under this head, PIP3 seeks to recover the abortive costs that it incurred in connection with the project, including professional fees. It estimates that they total £1,254,779.

The scope of the debate

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[17] The matter came before me for debate at the instance of the council. It accepts that the alternative ground of action is relevant and should be remitted to a proof before answer.

[18] Mr Dunlop submits, however, that the breach of contract case is irrelevant. He argues that the council was entitled to rescind in the circumstances that occurred. He also argues that on the basis of PIP3’s pleadings, it would not have carried out the development. As it is a “no

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transaction” case, PIP3 is not entitled to seek damages based on the projected profit of the completed development.

[19] Mr Dunlop further contends that the summons is fundamentally lacking in specification. He founds on the fact that PIP3 has not responded to averments made by the council about emails that it claims demonstrate earlier knowledge on the part of PIP3.

[20] On behalf of PIP3, Mr Martin seeks a proof before answer. He argues that the issues can only properly be determined after evidence has been heard.

In particular, the proper construction of the agreement depends on looking at the whole circumstances.

A

B

The contractual scheme

[21] The agreement consists of 26 clauses, together with a schedule divided into eight parts. Part 1 of the schedule is termed “the missives”. It governs the exercise of the option. Condition 1.1 states that on the settlement date PIP3 had to pay the IPP “by instantaneous bank transfer of cleared funds to such UK bank account as may be nominated by the council”.

[22] If PIP3 failed to make payment, then after 20 working days, the council was “entitled to rescind the missives and the option agreement”: cond.1.3. I have italicised the last four words to denote the fact that they were added by variation.

[23] Mr Martin argues that PIP3 did not require to make payment on the settlement date, because the council was in material breach of contract. He founds on clause 4.1 within the main body of the agreement. It provides that: “In so far as not already done, as soon as reasonably practicable after the effective date and in any event no later than the settlement date, the council shall instruct the remediation consultant to undertake the materials classification exercise and to prepare the site waste management plan and the materials management plan. The council will provide PIP3 with a copy of both the site waste management plan and the materials management plan as soon as reasonably practicable upon receipt thereof.”

[24] Mr Martin construes that clause to mean that the council had to deliver the SWMP and MMP to PIP3 before the settlement date. Only if the SWMP and MMP were in existence before the settlement date could the necessary works mentioned in cl.4.2 be carried out timeously. Clause 4.2 states: “No later than one month after the effective date, PIP3 shall provide the council with the ground level drawings. As soon as reasonably practicable after receipt of the ground level drawings, and in any event no later than the settlement date, the council shall appoint the initial site preparation works contractor to carry out and complete the initial site preparation works in accordance with the initial site preparation works contract and in accordance also with the site waste management plan and under the supervision of the remediation consultant. In the period from the initial site preparation works completion date until the settlement date, the council may, in its absolute discretion, carry out and complete the additional site preparation works in accordance with the additional site preparation works contract and in accordance also with the site waste management plan and under the supervision of the remediation consultant.”

[25] Mr Martin also submits that if I held the words to be ambiguous, PIP3’s construction accords with business common sense. It should not be obliged to pay the IPP without knowing the scope of its obligations. It would be unreasonable for there to be no definite time limit for delivering the SWMP and MMP.

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[26] There are formidable hurdles to PIP3’s submission. One relates to the proper construction of cl.4.1. The other concerns cond.1.7 of the missives. I shall consider them in turn.

[27] In my view cl.4.1 imposes a duty of instruction, not one of delivery.

To impose an obligation on the council to deliver the SWMP and MMP on or before the settlement date would be to insert words into the provision. I decline to do so. The words used by the parties are straightforward and easily understood. PIP3’s construction involves the rewriting of the contract.

[28] I also observe that it would be surprising if the council did have to deliver the SWMP and MMP on or before the settlement date. The agreement specifies that there should be three working weeks between the exercise of the option and settlement. It might be difficult for the council to obtain the two documents in question in such a short period. That is illustrated by the circumstances here, where PIP3 exercised the option shortly before Christmas.

[29] For these reasons, I reject the construction of cl.4 advanced by Mr Martin.

[30] I next consider cond.1.7 of the Missives. It provides that the council is not entitled to rescind: “for any period of time during which the delay in payment by PIP3 is due to any failure or breach by or on behalf of the council to implement its obligations or duties under the missives on time”.

[31] The wording selected by the parties is significant. Unlike cond.1.3, they did not extend its reach to include a breach of the option agreement.

Accordingly, the enquiry is a narrow one. Has the council defaulted in its obligations under the missives? If the answer is yes, then it cannot rescind. If, however, the answer is no, then it can.

[32] Mr Dunlop points out that the council refers to cond.1.7 in ans.4.13.

Despite having rewritten its pleadings three times since the action started, PIP3 does not mention it. Mr Dunlop submits that as a result there was a fundamental lacuna in the summons.The breach of contract claim is irrelevant, because PIP3 does not offer to prove that the delay in payment was caused by a failure by the council under the missives.

[33] Mr Martin argues that when Pt.1 of the schedule came into operation, the main body of the agreement did not cease to have effect. The parties therefore continued to be bound by its terms, including cl.4.1.

[34] I begin with the terms of the agreement. In Macari v Celtic Football and Athletic Co Ltd at p.640I [p.222] Lord Rodger stated that sometimes “the express terms of the contract will regulate the matter”. He emphasised that each obligation by one party is not necessarily the counterpart of every obligation by the other.

[35] I conclude that the parties did so regulate the matter here. They prescribed the circumstances in which the council lost its right to rescind, which did not include a breach of cl.4.1. Accordingly, PIP3 was not entitled to withhold the IPP on that basis.

Condition 8.7

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[36] Mr Martin argues that PIP3 was entitled to withhold payment because the council breached cond.8.7 of the missives. It requires the council to deliver certain documents at the settlement date, including the disposition, the title deeds, property searches and collateral warranties “to be granted by the consultant and contractor in favour of PIP3”.

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[37] As the parties agree that no such warranties were offered or delivered on the settlement date, Mr Martin submits that there is a clear and relevant case of breach of contract. I disagree.

[38] The opening words of cond.8 state that the council must deliver the documents “in exchange for compliance by PIP3 of its obligations in terms of cond.7”. What are those obligations? They are to pay the IPP. Accordingly unless PIP3 had made payment, it could not ask for those documents.

[39] Mr Martin maintains that there should have been a simultaneous exchange. A similar question was discussed in AMA (New Town) Ltd v Law. Lady Dorrian stated (at para.50) that it is always a question of construing the individual contract: “Parties are free to agree that the money will be handed over in advance of the title; or that the title will be transferred in advance of payment.”

[40] Lord Menzies stated (at para.2) that in the circumstances of that case, although the obligations: “were co-relative, it was not a contractual requirement that they should be precisely simultaneous – the obligation on the sellers only arose once the obligation on the purchasers had been fulfilled”.

[41] Having regard to the wording of the agreement in the present case, I conclude that payment of the IPP was the hinge of the transaction. PIP3’s rights depended on it fulfilling its obligation to pay. Unless and until that occurred, the council had no obligation to deliver the collateral warranties, together with the disposition and the title deeds. It would be odd if it had to hand over such significant documents in advance of payment.

[42] There are other problems that confront PIP3. Under cl.4.5 the council was not obliged to hand over the collateral warranties. Rather, its obligation was to procure that the remediation consultant and the contractors delivered them to PIP3. In terms of cl.4.7: “Provided the council carries out its obligations in terms of this agreement, PIP3 accepts that it shall have no recourse against the council in respect of the condition of the property.”

[43] The warranties were defined to include ones “to be granted”. It is therefore difficult for PIP3 to assert breach: (a) when no date is specified by which the parties need to agree the terms of the warranties; (b) the obligation to deliver the warranties is on the contractor, not on the council; and (c) the collateral warranties can only be produced “following completion of the groundworks”, which PIP 3 must carry out as soon as reasonably practicable after the settlement date.

A

B

C

D

E

Is PIP3 entitled to claim full profits?

[44] PIP3 sets out its claim to recover the lost profit of the development in Condescendence 11. The key averments as follows: “But for the [council’s] breach of contract in relation to the SWMP and the collateral warranties, [PIP3] would have proceeded with the development. [PIP3] would have procured (or, at the very least, would have had significant prospects of procuring) the necessary funding to carry out and profit from the development. The development was an attractive prospect for lenders. [PIP3] did not in fact have all the necessary funding to carry out the whole of the development in place as at the settlement date (although it did have the funding in place at that time for payment of the initial purchase price).”

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[45] In its case based upon breach of good faith and negligent misrepresentation, PIP3 adopts a different line. Because of their importance, I shall narrate them at length.

[46] Condescendence 2.7 states: “Had [PIP3] been made aware of the depositing of significant amounts of additional hazardous waste on the property by the [council], [PIP3] would have required to reassess the extent of remediation works necessary to render the property fit for the purposes of development in terms of the option agreement. [PIP3] would not have entered into the option agreement with defined remediation works without further investigations into the nature and condition of the property. [PIP3] would not have proceeded to exercise the option under the option agreement without further investigations into the nature and condition of the property.”

[47] Condescendence 4.1 states: “At the time [PIP3] exercised the option (and indeed at all times prior to February 2013) it was unaware of the fact that a significant quantity of hazardous waste had been deposited upon the property sometime during 2010 or 2011. Had [PIP3] been so aware, it would not have entered into the option agreement. It would not have exercised the option.”

[48] Condescendence 10.2 states: “But for the [council]’s negligent misrepresentation, [PIP3] would not have entered into the option agreement, would not have proceeded with the development and would not have exercised the option.

D

[49] Condescendence 10.3 states: “But for the [council]’s breach of duty, [PIP3] would not have proceeded with the development under the option agreement and would not have exercised the option.”

[50] Condescendence 11.4 states: “But for the negligent misrepresentation and/or breaches of those obligations of good faith . . . [PIP3] would not have exercised the option.”

E

F

G

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[51] Mr Martin submits that PIP3 was entitled to plead alternative and inconsistent grounds of action. He relied on a passage to that effect in Maclaren Court of Session Practice, p.311. Lord President Cooper approved that passage in Smart v Bargh and continued (at p.61): “Now, it seems to me, on the one hand, that there are many cases in which substantial justice not only permits but requires that a case may be stated alternatively on inconsistent averments of fact. But equally it appears to me that the court must always retain supervision and control over the extremer types of case, examples of which were figured, in which it would plainly be incompatible with substantial justice to the opposite party that a case should be allowed to proceed on such inconsistent averments and without the party making those averments being forced to choose between the alternative cases he seeks to make. There are two factors, the presence of which, I should think, will make it easier for the court to permit alternative cases, based on inconsistent averments, to go to proof. The one is the case where the party making the averments can justifiably assert that he or she is excusably in ignorance of the precise facts in question. The second is the case with the party whose averments are under scrutiny is not a pursuer but a defender; for this reason that any attempt on the part of the court to narrow the scope of a defender’s actings in stating his defences might – and

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I need say no more – give rise to awkward complications and repercussions upon the well-established plea of ‘competent and omitted’.”

[52] Neither of the two factors mentioned by Lord Cooper is present here.

PIP3 is not a defender and its position cannot be likened to that of a pursuer who did not know which of two ships caused a collision: London & Caledonian Marine Insurance; or whether a bus accident was occasioned by the fault of the driver or the conductor: Clarke v Edinburgh and District Tramways Co Ltd. [53] In my view, this is one of “the extremer types of case” over which the court should exercise supervision. PIP3 must know whether it would have exercised the option and developed the subjects. It must, for example, know whether it could have secured the £25 million necessary to finance the development.

[54] I agree with Mr Dunlop that the whole thrust of PIP3’s pleadings indicate that this is a “no transaction” case. It is not compatible with substantial justice to allow it to proceed to proof based on one sentence in condescendence 11 that contradicts the rest of the pleadings. The council is entitled to know the case it faces: Morrison’s Executors v Rendall. The corollary is that PIP3 is not entitled to embark on an expedition based on hope Moroni v Hugman.

Sheriff Principal Bowen adopted a similar approach in Royal Bank of Scotland v Harper Macleod.

[55] In my view, the circumstances justify the conclusion that PIP3 can only claim for abortive costs: NyKreditMortgage Bank plc v Edward Erdman Group Ltd (Interest on Damages).

A

B

C

Conclusion

[56] For the reasons I have outlined, I propose to sustain the council’s first plea-in-law to the extent of holding that PIP3’s claim for breach of contract is irrelevant and falls to be dismissed. I shall fix a by order hearing to determine further procedure. Meantime I reserve expenses.

D

For the pursuer: Martin QC, Garrity, instructed by Turcan Connell, Solicitors, Edinburgh.

For the defender: Dunlop QC, MacGregor, instructed by Glasgow City Council (Corporate Services).

E

F

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A COURT OF SESSION

4 September 2015

Outer House Lord Glennie B

JOHN STUART JOHNSTONE

Petitioner

Human rights—Mental health—Petitioner detained under compulsion order wishing to be transferred to prison—Personality disorder with risk to public—No medical treatment available—Whether rights under arts 3 or 5 breached—Whether legislation convention compliant— Mental Health (Care and Treatment) (Scotland) Act 2003 (asp 13)— European Convention for the Protection of Human Rights and Fundamental Freedoms C

D

E

F

G

Section 193 of the Mental Health (Care and Treatment) (Scotland) Act 2003 provides, inter alia: “. . . (2) If the Tribunal is satisfied— (a) that the patient has a mental disorder; and (b) that, as a result of the patient’s mental disorder, it is necessary, in order to protect any other person from serious harm, for the patient to be detained in hospital, whether or not for medical treatment it shall make no order under this section.”

The petitioner had been convicted of culpable homicide and a hospital order and a restriction order restricting his discharge from the State Hospital without limit of time had been made and he had been in that hospital since April 1998.

His diagnosis had changed over the period and he was diagnosed as having a dissocial personality disorder with a risk of serious harm to the public and was not eligible for release under the mental health regime. He contended that there was no treatment for his condition in the State Hospital which could not equally be given in prison and he wished to be transferred to prison where, with a view to eventual release, he would expect to be provided with a reasonable opportunity of taking steps to rehabilitate himself. The respondents refused to transfer him on the basis they had no power to do so because he had never been sentenced to imprisonment.

He applied for judicial review of the failure to transfer him and to provide sufficient opportunities for rehabilitation and claimed that the provisions of the Mental Health (Care and Treatment) (Scotland) Act 2003 were incompatible with his Convention rights and were therefore “not law”. He also claimed that his Convention rights had been breached by his being subjected to degrading treatment in terms of art.3, and, in terms of arts 3 and 5 due to the absence of a statutory regime for the transfer of persons from hospital to prison. He sought an order ordaining him to be transferred to prison.

Section 136 of the 2003 Act permits the transfer of prisoners to the State Hospital if they have a mental disorder requiring medical treatment but there is no reciprocal provision permitting the transfer from hospital to prison if no prison sentence has been imposed.

The petitioner argued that there was no treatment for his condition and so he should not be detained in hospital. Insofar as the 2003 Act permitted detention in the State Hospital even though there was no necessity for 370

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treatment requiring such detention that was not compliant with art.5. It was also degrading contrary to art.3 that he continue to be held in the State Hospital and therefore limited to the company of others with whom he could not communicate effectively and form meaningful friendships when his mental condition did not justify it.

Held (1) that the provisions of the 2003 Act which permitted the detention of a person with a mental impairment in a mental institution on grounds, among others, of public safety, did not require a person suffering from a medical impairment to be transferred to the prison environment in circumstances where there was no effective treatment within the mental institution, were not non-compliant with the Convention (para.40); and (2) that the petitioner’s continued detention in the State Hospital was not in breach of art.5 of the Convention (para.40); and petition refused.

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Cases referred to: A v Scottish Ministers [2001] UKPC D 5; 2002 S.C. (P.C.) 63; 2001 S.L.T. 1331 AERTS v Belgium [1998] ECHR 64; (1998) 29 E.H.R.R. 50 Ashingdane v United Kingdom [1985] ECHR 8; (1985) E.H.R.R. 528 Drew v United Kingdom (2006) 43 E.H.R.R. S.E.2 G v Mental Health Tribunal for Scotland [2013] UKSC 79; (S.C.) 2014 S.C.L.R. 415; 2014 S.C. (U.K.S.C.) 84; 2014 S.L.T. 247 Glien v Germany [2013] ECHR 1206 Ilascu v Maldova and Russia [2004] ECHR 318; (2004) 40 E.H.R.R. 1030 James v United Kingdom (2013) 56 E.H.R.R. 12 Johnstone v HM Advocate [2013] HCJAC 92; 2013 S.C.C.R. 487; 2013 S.L.T. 1115 Johnstone v HM Advocate [2013] HCJAC 129 R v Goltz, [1991] 3 RFC 485 R (Haney and others) v Secretary of State for Justice [2014] UKSC 66; [2015] A.C. 1344; [2015] 2 W.L.R. 76 R v Secretary of State for Scotland, (H.L.) 1999 S.C.L.R. 74; 1999 S.C. (H.L.) 17; 1999 S.L.T. 279 R (Unison) v Secretary of State for Health [2010] EWHC 2655 (Admin) R (Wheeler) v Office of the Prime Minister [2008] EWHC 1409 (Admin) Reid v HM Advocate [2012] HCJAC 150; 2013 S.C.C.R.; 2013 S.L.T. 65 Reid v Scottish Ministers [2015] CSOH 84 Reid v United Kingdom (2003) 37 E.H.R.R. 9 Scottish Ministers v Mental Health Tribunal for Scotland [2009] CSIH 9; (I.H.) 2009 S.C.L.R. 224; 2009 S.C. 398; 2009 S.L.T. 273 Winterwerp v The Netherlands (1979) 2 E.H.R.R. 387 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 Glennie on 4 September 2015.

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LORD GLENNIE Introduction

[1] On 8 April 1998, on the fourth day of his trial for murder, the petitioner pled guilty to a charge of culpable homicide on the basis of diminished responsibility. He had assaulted the deceased, raped her and thrown her from a window to her death.

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[2] The plea was tendered on the basis that it provided him with his best chance of avoiding spending the remainder of his life in prison. There were psychiatric reports to the effect that he was suffering from a mental disorder or impairment. The plea was accepted by the Crown on condition that the petitioner would not oppose the making of a hospital order.

[3] After the plea was accepted, unchallenged evidence was led before the trial judge from two psychiatrists to the effect, as summarised in the trial judge’s report, that the petitioner was “of very low intelligence margining on mental deficiency, but also suffered from mental impairment sufficient to meet the requirements of diminished responsibility”. Both psychiatrists were of the view that the petitioner “constituted a serious danger to society by reason of his mental state”. The trial judge accepted that evidence. Following the advice of both psychiatrists, he made a “hospital order” under s.58 of the Criminal Procedure (Scotland) Act 1995 (the 1995 Act), ordering that the petitioner be detained in the State Hospital, and a “restriction order” under s.59 of the 1995 Act, restricting the petitioner’s discharge from hospital without limit of time. Pursuant to those orders the petitioner has been detained at the State Hospital since 8 April 1998. There have since then been changes to the 1995 Act. The petitioner is now to be treated as being subject to a “compulsion order” (in terms of s.57A of the 1995 Act) and a “restriction order” (together known as a CORO).

[4] The opinion of psychiatrists as to the petitioner’s diagnosis has changed with the passage of time. He is now diagnosed as having a dissocial personality disorder. He accepts that that personality disorder is such that, if he were now to be released, he would pose a risk of serious harm to the public. As a result, he is not presently eligible for release under the mental health regime. He contends, however, there is no treatment for this condition in the State Hospital which could not equally be provided in prison.

[5] In those circumstances, the petitioner wishes to be transferred from the State Hospital to prison where, with a view to his eventual release, he would expect to be provided by the prison authorities with a reasonable opportunity of taking steps to rehabilitate himself and, in due course, to demonstrate to the Parole Board that he no longer presents an unacceptable danger to the public: see R (Haney and others) v Secretary of State for Justice.

[6] The respondents refuse to transfer him to the prison regime. They say that they have no power to do so: the relevant provisions of the Mental Health (Care and Treatment) (Scotland) Act 2003 (the 2003 Act) provide for periodical reviews of the condition of a person detained in the State Hospital, which may in certain circumstances result in that person’s release, but they do not provide for the person to be transferred to prison.

[7] One possible solution to this conundrum might have been for the petitioner to appeal out of time against sentence, ie against the hospital and restriction orders made by the trial judge back in 1998. Were such an appeal to be successful, the appeal court could substitute a sentence of imprisonment, though there would be obvious difficulties in the court knowing on what basis it should proceed in determining the appropriate sentence—for example, should he be sentenced on the basis of his plea of culpable homicide if the evidence no longer supported the case that he was then suffering from diminished responsibility? But I need not concern myself with this. The petitioner did appeal out of time, with leave of the court, in 2007. He contended that the trial judge should not have made either the hospital order or the restriction order because he was not at that time suffering from a mental disorder in terms of s.58 of the Criminal Procedure (Scotland) Act 1995, this

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notwithstanding the fact that at trial he expressly accepted that he was suffering from a mental disorder and that he would not oppose the making of a hospital order. His appeal against sentence was refused in 2013. Distinguishing the case of Reid v HM Advocate, which concerned a person in a substantially similar position to that of the petitioner, the court held that the orders made by the trial judge were appropriate at the time they were made, proceeding as they did upon expert opinion given to the court at that time. There was no new evidence. No miscarriage of justice had occurred. His application for leave to appeal to the UK Supreme Court was also refused. So that route is closed to the petitioner, at least for now.

[8] Accordingly, the petitioner continues to be detained at the State Hospital.

He complains that the lack of any means by which he can be transferred to prison breaches his convention rights: cf the European Convention on Human Rights and Fundamental Freedoms (ECHR or the Convention).

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The issues

[9] In his petition the petitioner seeks the following relief: (1) declarator that the relevant provisions of the 2003 Act are incompatible with his Convention rights and therefore “are not law”; (2) declarator that his Convention rights have been breached by the Scottish Ministers’ failure to provide him with a real opportunity at rehabilitation; (3) declarator that his Convention rights have been breached by the Scottish Ministers’ subjecting him to degrading treatment in terms of art.3 ECHR; (4) declarator that his Convention rights in terms of arts.3 and 5 ECHR have been breached by the Scottish Ministers due to the absence of a statutory regime for the transfer of persons from hospital to prison; (5) an order ordaining the Scottish Ministers to make an order to transfer him to a prison, this being the only lawful decision available to the respondents; (6) declarator that his Convention rights have been breached by the Scottish Ministers by detaining him in a hospital without any power to do so; (7) damages of £10,000.

[10] At the first hearing, Mr McCluskey, who appeared for the petitioner, did not insist on the declarator sought under para.(2) above. I understood that to be because he recognised that the now established duty to take reasonable steps to provide an opportunity for rehabilitation arose, at least on the case law to date, only in the context of a prisoner serving a sentence of imprisonment of indefinite duration: R (Haney) v Secretary of State for Justice.

[11] Mr McCluskey did, however, insist on the order sought in para.(5). It is clear in my opinion that the court could not possibly make such an order.

The petitioner has never been sentenced to prison for this offence. Since, as the petitioner accepts—and indeed it is at the core of his complaint—the 2003 Act contains no provision for bringing about a transfer from the State Hospital to prison, the respondents have no power to transfer the petitioner to prison even if they were minded to do so. Nor could this court compel them to do it.

If he were to be transferred, he would immediately be entitled to be released, since his detention in prison would not be in accordance with the law. It could not be justified by reference to any sentence of the court.

[12] Those two points having fallen away, the issues in this petition as argued before me seem to me to resolve themselves into these two questions:

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(a) Is the petitioner’s continued detention in the state hospital in breach of arts.3 and/or 5 ECHR? (b) Is the relevant legislation non-ECHR compliant because of the absence of any provision allowing the transfer of persons from the State Hospital to prison?

There is, inevitably, considerable overlap between the two.

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Articles 3 and 5 ECHR

[13] Article 3 provides that “No one shall be subjected to torture or to inhuman or degrading treatment or punishment.”

[14] Article 5(1) provides that “everyone has the right to liberty and security of person” and that “no one shall be deprived of his liberty save in the following cases and in accordance with the procedure prescribed by law”. The cases relied upon here are (a) “the lawful detention of a person after conviction by a competent court” and (e) “the lawful detention . . . of persons of unsound mind . . .”.

The relevant legislation

[15] “Mental disorder” is defined in s.328(1) of the 2003 Act as meaning any “(a) mental illness; (b) personality disorder; or (c) learning disability”. The exceptions listed in subs.(2) are not relevant for present purposes.

[16] Section 136 of the 2003 Act, read short, permits the transfer to a State Hospital of prisoners serving a period of imprisonment if they have a mental disorder requiring medical treatment to prevent it getting worse or to alleviate its symptoms or effects; and if, without such treatment, there would be a significant risk to the health, safety and welfare of the prisoner or to the safety of any other person. However, there is no reciprocal provision, permitting the transfer to prisons of those who are detained in a State Hospital by order of the court and have not been given a sentence of imprisonment. Although this is common ground between the parties, I should explain this in more detail.

[17] Part 10 of the 2003 Act contains provisions dealing with compulsion orders and restriction orders. Chapter 2 deals with review of such orders. The relevant sections are 182, 184, 188 and 193. It is not necessary to set them all out in full. They lay down a scheme for periodical review of COROs by the responsible medical officer (sometimes abbreviated to RMO), by the Scottish Ministers and, ultimately, by the independent Mental Health Tribunal.

[18] The starting-point is s.182, which requires the patient’s RMO every 12 months to carry out a review in respect of both the compulsion order and restriction order, by carrying out a medical examination of the patient or arranging for an approved medical practitioner to do so. He must then consider whether the conditions mentioned in s.182(4) continue to apply in respect of the patient: s.182(3)(b)(i). In effect, these are the same conditions as mentioned in para.16 above in connection with the transfer of a prisoner to the State Hospital: ie, does he have a mental disorder requiring medical treatment to prevent it getting worse or to alleviate its symptoms or effects and would there be a significant risk to the health, safety and welfare of the prisoner or to the safety of any other person without such treatment? Then he must consider whether, as a result of the patient’s mental disorder, it is necessary, in order to protect any other person from serious harm, for the patient to be detained in hospital, whether or not for medical treatment: s.182(3)(b)(ii).

And finally he must consider whether it continues to be necessary to subject

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the patient to the compulsion and restriction orders: s182(3)(b)(iii) and (iv).

In terms of s.183 of the 2003 Act, he must submit a report (sometimes referred to as his “annual report”) to the Scottish Ministers recording his views on these matters and then, depending upon whether he is or is not satisfied with each of the various matters referred to above, making a recommendation to Scottish Ministers to revoke or vary the compulsion or restriction order.

If he is satisfied of those matters to which I have referred then he makes no recommendation and the compulsion and restriction orders remain in force.

[19] I can pass over s.184 which simply imposes on the RMO a duty to keep compulsion and restriction orders under review by considering those same matters, deciding in the same way whether to make recommendations for revocation or variation of those orders and, if he does recommend revocation or variation, by submitting a report to Scottish Ministers.

[20] If the RMO submits a report recommending revocation or variation of the compulsion and restriction orders, the Scottish Ministers are required to make a reference to the Mental Health Tribunal (the tribunal) in respect of those orders: s.185. Quite separately, the Scottish Ministers are under a duty to keep all compulsion and restriction orders under review, on much the same basis as the RMO is placed under a similar duty by s.184, and, in cases where that review leaves them unsatisfied of some or all of the relevant matters, they must apply to the tribunal for an order revoking or varying the orders as the case may be: s.188. Other opportunities for a reference or application to the tribunal are set out in ss.189, 191 and 192. On any such reference or application the tribunal is required to go through substantially the same exercise and decide whether or not it is satisfied of certain matters therein set out: s.193. In particular, in terms of s.193(2): “If the Tribunal is satisfied— (a) that the patient has a mental disorder; and (b) that, as a result of the patient’s mental disorder, it is necessary, in order to protect any other person from serious harm, for the patient to be detained in hospital, whether or not for medical treatment, it shall make no order under this section.”

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The words underlined are critical to the petitioner’s argument. It has been held that the purpose of s.193 is to provide a sequential list of tests to be applied to patients detained under the 2003 Act in order to allow for an ordered consideration and review of their circumstances: Scottish Ministers v Mental Health Tribunal for Scotland. The consequence of this is that if the tribunal is satisfied that the patient has a mental disorder and that, as a result of that mental disorder, it is necessary, in order to protect any other person from serious harm, for the patient to be detained in hospital, whether or not for medical treatment, then the tribunal makes no order and the compulsion and restriction orders remain in place unaltered.

[21] There is a right of appeal to the Court of Session from a decision of the tribunal making no order under s.193: see s.323. An appeal may be brought on the grounds that: (a) the tribunal’s decision was based on an error of law; (b) there was some procedural impropriety in the conduct of the hearing before the tribunal; (c) the tribunal acted unreasonably in the exercise of its discretion; and/or (d) the tribunal’s decision was not supported by the facts which it found to be established: s.324.

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The tribunal’s decision in November 2013

[22] The petitioner’s case came before the tribunal as a reference by the Scottish Ministers under s.189 of the 2003 Act. On 26 November 2013 the tribunal made a decision in terms of s.193. It considered the matter on documentary evidence. The petitioner’s solicitors were made aware of the reference but did not ask to lead oral evidence or to make oral submissions.

[23] The tribunal found as a fact “that the patient [the petitioner] has a mental disorder, namely dissocial personality disorder” (para.15(v)); that he had a “lengthy forensic history of serious and violent sexual offending” (para.15(vi)); that he had been supervised in a hospital setting since his index offence, including periods of restraint due to his unpredictable and aggressive presentation (para.15(vii)); that the responsible medical officer had decided that referral to a medium secure care unit was not justifiable at present (para.15(viii)); that in the State Hospital he receives a multidisciplinary approach to his care and treatment, which needs to take place at present within a hospital setting due to the identified risks of him harming others (para.15(xii)); that the conditions mentioned in s.182(4)(b) of the 2003 Act continued to apply to him, “as he is receiving care within the hospital setting, with input from both psychiatric nursing and social work, which prevents [his] mental disorder from worsening and can alleviate his condition” and “if he were not given such treatment, [he] would pose a significant risk to the safety of others and to his own safety and welfare” (para.15(xiii)); and that it was necessary for him to be subjected to the compulsion and restriction orders (para.15(xiv) and (xv)).

[24] In explaining its reasons for its findings, the tribunal referred in para.16(i) to the fact that the various reports before it, which it found to be consistent and reliable, established that the petitioner “has a mental disorder, namely dissocial personality disorder”, which “can only be managed through the compulsion order and restriction order which are in place and based in a hospital setting”. No contrary evidence had been presented. There was no dispute with regard to his mental disorder, albeit that his diagnosis had changed over time from mental impairment to dissocial personality disorder.

Further, the tribunal was satisfied that the serious harm test was met: para.16(ii). The petitioner had been for some time in a highly structured environment and any thought of his being “stepped down from the high secure State Hospital to a medium secure unit” had been abandoned by the responsible medical officer after incidents in which he had become unreasonably angry and aggressive in response to relatively minor stressors.

The evidence established that there was a risk of serious harm to others if the petitioner were not subject to detention in hospital. There was no evidence to contradict this.

[25] The tribunal concluded its decision in para.17 as follows: “[I]t appears to the tribunal that the tests which must be followed in this reference are as follows: (i) Does the patient have a mental disorder?

The patient has a mental disorder, namely dissocial personality disorder.

The tribunal was satisfied of this diagnosis on the basis of the uncontradicted medical evidence, in particular the annual report, and subsequent update, of the RMO. (ii) As a result of the patient’s mental disorder, is it necessary, in order to protect any other person from serious harm, for the patient to be detained in hospital, whether or not for medical treatment?

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The tribunal was satisfied that, as a result of the patient’s mental disorder, it is necessary, in order to protect any other person from harm, for the patient to be detained in hospital, whether or not for medical treatment.

The tribunal was so satisfied on the basis of the documentary evidence before it, in particular the annual report of the RMO, the RMO’s subsequent update, the HCR-20 risk assessment and the worksheet for risk for sexual violence protocol.”

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The latest report from the responsible medical officer

[26] This conclusion is consistent with the reports of the RMOs dealing with the petitioner’s case on a regular basis. The most recent annual report from the RMO, Dr Natasha Billcliff, a consultant forensic psychiatrist, is dated 16 March 2015. That report concludes, again, that the petitioner has “a mental disorder in the form of dissocial personality disorder”. He fulfilled most of the criteria for that diagnosis, including: lack of concern for the feelings of others; gross and persistent attitudes of irresponsibility and disregard for social norms, rules and obligations; incapacity to maintain enduring relationships though having no difficulty in establishing them; very low tolerance to frustration and a low threshold for the discharge of aggression and violence; incapacity to experience guilt or to profit from experience, particularly punishment; and a tendency to blame others or to offer plausible rationalisations for the behaviours which brought him into conflict with society. Dr Billcliff’s opinion was that it was necessary in order to protect other people from serious harm for the petitioner to be detained in hospital whether or not for medical treatment. Under reference to his history of offending, she was clear in her view that he would potentially represent a high risk of serious harm to members of the public were he to be at liberty. Although currently (and for many years) not being prescribed any psychiatric medication, “he does broadly benefit from medical treatment such as nursing care and psychological therapies”.

That treatment is likely to prevent his mental disorder worsening and to alleviate some of the symptoms and effects of the disorder. Were he not to be provided with such treatment there would be a significant risk to the safety of other people. He should continue to be subject to a compulsion order. He continues to struggle with anger management problems and a propensity to misinterpret minor day-to-day matters. He benefits from care within a protective environment and could not be cared for safely within the community.

He should also continue to be subject to a restriction order since he continues to present a high risk to public safety and his management requires the additional scrutiny and safeguards inherent in a restriction order. It remains necessary for him to be detained in hospital until further testing with reduced security and on escorted passes into the community have been successful.

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Arguments

[27] Referring to art.5(1)(e) ECHR, the petitioner argues that though he may have a personality disorder he is not of unsound mind. In his petition he refers to evidence heard by the appeal court during the course of his unsuccessful appeal, and the court’s apparent acceptance (at para.60 of the opinion) that “were the question of [his] mental impairment to be analysed now, it is unlikely that modern psychiatric opinion would regard him as [mentally] impaired”.

His mental disorder, such as it is, does not require treatment in an institution.

The definition of “mental disorder” in s.328 of the 2003 Act was much wider than that given to “unsound mind” for the purposes of art.5. In order for him to be classified as being of “unsound mind”, as that expression is used in

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art.5(1)(e), any mental disorder must be such that it requires treatment in an institution. Insofar as the 2003 Act permits detention in the State Hospital even though there is no necessity for treatment requiring such detention (“whether or not for medical treatment”), that is not compliant with art.5.

There had to be some link between the conditions of restraint and the purpose for which he was placed there. Detention in the State Hospital was detention in the “wrong environment” and was arbitrary. It was also degrading contrary to art.3 that he continue to be held in the State Hospital—and therefore limited to the company of others with whom he could communicate effectively and form meaningful friendships—when his mental condition did not justify it.

[28] In the course of submissions I was referred to a large number of authorities. Those decided by the Strasbourg Court included: Winterwerp v The Netherlands; Ashingdane v United Kingdom; AERTS v Belgium; Reid v United Kingdom; Ilascu v Moldova and Russia; Drew v United Kingdom; Glien v Germany; and James v United Kingdom. Cases decided in Scottish or other UK courts included: A v Scottish Ministers; R (Wheeler) v Office of the Prime Minister; Scottish Ministers v Mental Health Tribunal of Scotland (JK); R (Unison) v Secretary of State for Health; G v Scottish Ministers; and R (Haney) v Secretary of State for Justice. I was also referred to the Canadian case of R v Goltz.

[29] It is not necessary to summarise the submissions made on behalf of the respondents. These are picked up in the discussion which follows.

Discussion

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[30] The question of how to deal with convicted offenders, who are confined in a mental institution but whose mental impairment (such as dissocial personality disorder) is not susceptible to medical treatment, when their release would present a risk to the public, is not new. It was considered by the Scottish Parliament in 1999 when it passed the Mental Health (Public Safety and Appeals) (Scotland) Act 1999 and has since then been considered by the MacLean Committee, Report on Serious Violent and Sexual Offenders (SE/2000/68), Ch.12, and the Millan Committee, Report on the Review of the Mental Health (Scotland) Act 1984. Those reports informed the discussions leading to the 2003 Act.The problem, and its history, is summarised in paras 10–16 of the speech of Lord Hope in A v Scottish Ministers. The problem arises in cases where a person convicted of a lesser offence (e.g. culpable homicide rather than murder) on the grounds of diminished responsibility is dealt with by the imposition of a hospital (or compulsion) order combined with a restriction order, without any sentence of imprisonment being imposed at the same time. It was suggested in A v Scottish Ministers that there were only about 12 individuals in this position. One of those was Mr Reid. The present petitioner, Mr Johnstone, is another. The problem is this. If there comes a point when it is recognised that the mental impairment from which they are suffering is not treatable, what is the justification for their continued detention in a mental institution. From the point of view of prevention of danger to the public, they could as easily be detained in prison.

But there is no mechanism for transferring them to prison. They have not been sentenced to any period of imprisonment, and any attempt to revisit the matter by imposing a sentence of imprisonment at a later date—otherwise than by way of appeal against sentence as in Mr Reid’s case—would be susceptible to challenge on Convention grounds as retrospective and arbitrary.

The solution adopted by the Scottish Parliament in 1999, and again in 2003, was to legislate for the continued detention of such a person in the mental

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institution if he would present a danger to the public were he to be released, whether or not his detention in the institution was necessary for medical purposes. It is this which has given rise to this and other challenges based on Convention rights.

[31] It is instructive to compare this case with those concerning Mr Reid (see para.7 above). Mr Reid’s situation was in many ways similar to that of Mr Johnstone. He too pled guilty to a charge of culpable homicide on the basis of diminished responsibility and was committed to the State Hospital. Before his successful appeal against sentence, he unsuccessfully challenged the lawfulness of his continued detention in the State Hospital, taking much the same points as are now taken by Mr Johnstone, albeit the legislation was different at the time.

It is only recently that their paths have diverged. After an unsuccessful appeal, Mr Reid’s case was referred again to the High Court in 2010 by the Scottish Criminal Cases Review Commission. On that reference the court held that there had been a miscarriage of justice. It quashed the hospital and restriction orders and in their place imposed a sentence of life imprisonment with a punishment part of ten years: see Reid v HM Advocate. That has resulted in his being transferred from the State Hospital to the prison regime. From there he has been able to bring a petition complaining (so far unsuccessfully) that he has not been afforded a reasonable opportunity of rehabilitation: Reid v Scottish Ministers. That is the position Mr Johnstone wishes to be in. His problem is that his path diverged from that of Mr Reid when the criminal appeal court refused his appeal out of time against the hospital and restriction orders imposed on him at his trial. So he now takes many of the points taken unsuccessfully by Mr Reid before his successful appeal against sentence; and the outcome of Mr Reid’s forensic struggles are directly in point as regards the issues raised in this petition.

[32] In 1996 Mr Reid challenged by judicial review the decision of the sheriff refusing to discharge him from the hospital and restriction orders imposed upon him at the time of his conviction. That challenge failed in the House of Lords: R v Secretary of State for Scotland. It is unnecessary to consider those arguments in any detail. They turned upon the meaning of “treatment” as used in s.17(1) of the Mental Health (Scotland) Act 1984. The Act was not in its present form and no ECHR arguments were deployed in the domestic proceedings. Reversing the decision of the Inner House, the House of Lords held that treatment which might alleviate the symptoms and manifestations of the underlying medical disorder of a psychopath was sufficient. Convention issues were, however, raised when Mr Reid took his case to the European Court of Human Rights in Strasbourg. He argued, amongst other things, that his detention in a mental institution could not be justified under art.5(1)(e) unless his mental condition was amenable to medical treatment. That argument was rejected by the Court: Reid v United Kingdom. The Court held that no such requirement was imposed by that provision in art.5(1)(e). I quote from paras46–48 of the judgment of the Court: “In order to comply with art.5(1) of the Convention, the detention in issue must take place “in accordance with the procedure described by law” and be “unlawful”. The Convention here refers essentially to national law and lays down the obligation to conform to the substantive and procedural rules of national law, but it requires in addition that any deprivation of liberty should be in keeping with the aim of art.5, namely to protect the individual from arbitrariness.

47 For the purposes of art.5(1)(e), an individual cannot be deprived of his liberty as being of ‘unsound mind’ unless the following three minimum conditions are satisfied: first, he must reliably be shown to be of unsound

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mind; secondly, the mental disorder must be of a kind or degree warranting compulsory confinement; thirdly, the validity of continued confinement depends upon the persistence of such a disorder.

48 Furthermore, there must be some relationship between the ground of permitted deprivation of liberty relied on and the place and conditions of detention. In principle, the ‘detention’ of a person as a mental health patient will only be ‘lawful’ for the purposes of sub-para.(e) of para.1 if effected in a hospital, clinic or other appropriate institution.”

The principles summarised in para.47 were taken from cases such as Winterwerp v The Netherlands. Those summarised in para.48 were taken from cases such as Ashingdane v United Kingdom and AERTS v Belgium.

[33] The court went on to apply those general principles to the case before it. Having dealt in para.49 with the question of whether the continued detention was unlawful under domestic law, the court went on to deal with the Convention arguments as they applied to the case. Because it is directly in point in this case, I quote from paras.50–54: “The principal question which arises, in Convention terms, is whether the applicant’s detention offends the aim of protecting the individual from arbitrator tension, in particular whether his continued detention in hospital can be justified under art.5(1)(e). The applicant’s argument, essentially, is that he is now recognised as suffering from a psychopathic personality disorder that cannot be treated in hospital and that accordingly his detention in hospital is inappropriate and therefore arbitrary. . . .

51 This argument however turns on the domestic law criterion applicable at the time, namely, that detention in a mental hospital was conditional on the illness or condition being of a nature or degree amenable to medical treatment. There is no such requirement imposed by art.5(1)(e) of the Convention. The Court’s case law refers rather to the applicant being properly established as suffering from a mental disorder of a degree warranting compulsory confinement. Such confinement may be necessary not only where a person needs therapy, medication or other clinical treatment to cure or alleviate his condition, but also where the person needs control and supervision to prevent him, for example, causing harm to himself or other persons.

52 . . . In light of the sheriff’s finding that there was a high risk of his re-offending if released, such offending being likely to have a sexual connotation, the decision not to release may be regarded as justified under art.5(1)(e).

53 Furthermore, the Court does not consider that any issues of arbitrariness are disclosed by the fact that the grounds on which detention in hospital may be ordered in domestic law have altered over the period during which the applicant has been detained. . . . Most recently, the Court notes that the law has been amended to make it clear in cases such as the applicant’s that the fact that the mental disorder is not treatable in clinical terms does not require release where a risk to the public remains.

54 Nor does the Court consider that the detention of the applicant in a mental hospital offends the spirit of art.5 of the Convention. Generally, in fact, it would be prima facie unacceptable not to detain a mentally ill person in a suitable therapeutic environment. It would note that, even if the applicant’s condition is not currently perceived as curable or susceptible to treatment, the sheriff found on the basis of the evidence before him that he derived benefit from the hospital environment and that his symptoms became worse outside its supportive structure. In the circumstances, there is a sufficient relationship between the grounds of the detention and the place and conditions of detention to satisfy art.5(1) of the Convention.”

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2016 S.C.L.R.

Johnstone, Petitioner (OH)

381

[34] The decision of the Strasbourg Court in Reid v United Kingdom is directly contrary to the arguments advanced on behalf of the petitioner in this case. It makes it clear that a person may be regarded as of “unsound mind” for the purposes of art.5(1)(e) if he is suffering from a mental illness, such as a personality disorder, which is not curable by medical intervention. Further, anticipating the change first introduced in 1999 and now found in the 2003 Act, it confirms that it is not contrary to art.5 if the continued detention of a person suffering from a mental illness is justified by reference to a risk to the public if he were to be released.

[35] Between the decision of the House of Lords and that of the Strasbourg Court in Mr Reid’s case, the Privy Council considered the same question in A v Scottish Ministers. Mr Reid was involved in that case too, as one of the three applicants. It was held that it was not incompatible with a person’s rights under art.5(1)(e) for the Scottish Parliament to require the continued detention of restricted patients in a hospital where this was necessary on the grounds of public safety, whether or not their mental disorder was treatable: see in particular per Lord Hope at paras.28–30 and per Lord Clyde at paras 57–64.

[36] There is, therefore, binding authority in the Privy Council, consistent with the decision of the Strasbourg Court in Reid v United Kingdom, to the effect that continued detention in the State Hospital of a person, such as Mr Johnstone, with a mental impairment under provisions similar to those now contained within the 2003 Act does not infringe his Convention rights even in a case where his mental condition is not treatable and where his continued detention is on grounds of public safety.

[37] Mr McCluskey argued that in Glien v Germany the Strasbourg Court had departed from its earlier interpretation of what constituted “unsound mind” for the purposes of art.5(1)(e). For detention to be lawful, he submitted, the mental disorder must be so serious as to require treatment in an institution.

That was a case in which the applicant was convicted of numerous counts of sexual abuse of children. He was sentenced to four years’ imprisonment and the court ordered his “preventive detention” thereafter. That preventive detention was served within the prison system and was justified by the German courts, who regularly reviewed the execution of the sentence, on grounds that the applicant had a psychopathic dissocial personality. The Strasbourg Court held, in effect, that his detention within the prison system could not be justified under art.5(1)(e), since any detention on the grounds that he was of “unsound mind” would have to be in an appropriate mental institution.

[38] There are passages in the judgment of the court which, taken in isolation, might appear to support Mr McCluskey’s submission. The best, from his point of view, is at para.85, where, having recapitulated the relevant principles and then sought to apply them to the instant case, the court said this: “The Court would also recall, however, that the permissible grounds for deprivation of liberty listed in art.5(1) are to be interpreted narrowly . . . It therefore considers that a mental condition must be of a certain gravity in order to be considered as a ‘true’ mental disorder for the purposes of subpara.(e) of art.5(1). Guidance in this respect may be obtained from the Court’s well-established case-law to the effect that the detention of a person as a mental health patient will only be covered by subpara.(e) of art.5(1) if effected in a hospital, clinic or other appropriate institution . . . This implies that the mental disorder must be so serious as to necessitate treatment in such an institution” (emphasis added).

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Johnstone, Petitioner (OH)

2016 S.C.L.R.

The reference to well-established case law is a reference to cases such as Ashingdane v United Kingdom and AERTS v Belgium. Mr McCluskey emphasised the word “treatment” in the last sentence. He submits that the court in Glien specifically held that, for a person to be regarded as of “unsound mind” sufficient to justify detention under art.5(1)(e), his mental disorder has to be so serious as to necessitate “treatment” in a mental institution.

Mr Johnstone’s condition, he submits, is untreatable and therefore cannot justify detention under art.5(1)(e).

[39] This submission goes further than the case of Glien warrants. The passage which I have quoted has to be read in context. That context was a complaint by the applicant that his mental condition was being used as a justification for his detention in prison. The Court upheld this aspect of the complaint. It did not, however, go on to say that his mental impairment would not have been sufficient to justify his detention in a mental institution.

That question was not before the Court. Further, before considering the particular case before it, the Court recapitulated the relevant principles applicable to art.5(1). It reiterated, in para.71, that art.5(1) contained an exhaustive list of permissible grounds for deprivation of liberty, which had to be narrowly interpreted in order to ensure that no one was arbitrarily deprived of his liberty. In para.72 it reiterated further that the term “persons of unsound mind” in art.5(1)(e) does not lend itself to precise definition, its meaning continually evolving as research and psychiatry progresses; but it reiterated also the principles laid down in Winterwerp (which are the same as those set out in Reid v United Kingdom at para.47). In para.73 it specifically referred to its decision in Reid v United Kingdom as supporting the proposition that: “A mental disorder may be considered as being of a degree warranting compulsory confinement if it is found that the confinement of the person concerned is necessary as the person needs therapy, medication or other clinical treatment to cure or alleviate his condition, but also where the person needs control and supervision to prevent him, for example, causing harm to himself or other persons . . . .” (emphasis added).

In light of this, it is, to my mind, impossible to regard the decision in Glien as supporting the proposition that art.5(1)(e) can only be invoked as a justification for depriving a person of his liberty if the medical impairment from which he suffers is so serious as to necessitate treatment, by way of therapy, medication or other clinical treatment to cure or alleviate that condition.

[40] I therefore reject the argument that the provisions of the 2003 Act, which permit the detention of a person with a mental impairment in a mental institution on grounds, amongst others, of public safety, and do not require a person suffering from a medical impairment to be transferred to the prison environment in circumstances where there is no effective treatment available within the mental institution, are non-compliant with the Convention. I also reject the argument that the petitioner’s continued detention in the State Hospital is in breach of art.5.

[41] At certain points in his argument, Mr McCluskey appeared to be contending that I should hold, on the evidence, that the petitioner was not mentally impaired, that he was not capable of being treated for that impairment within the State Hospital and that, in any event, his detention there could not be justified on grounds of public safety. In my opinion it would not be open to this court to do that. The 2003 Act contains within it a detailed set of provisions enabling the condition of someone detained within the State Hospital to be

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Johnstone, Petitioner (OH)

383

reviewed on a regular basis by an independent tribunal, with the opportunity of appealing the decision of that tribunal to the court. The petitioner was offered the opportunity of producing evidence and being represented at the last hearing of the tribunal. He did not take up that opportunity. He had the opportunity of appealing the tribunal’s decision. He has not done so. The tribunal reviews the position every two years, and there can be a review before that if one is requested. Even if the decision of the tribunal was open to doubt, and I have no reason to think that it is, it would be quite wrong for this court, in effect, to overturn that decision on a petition for judicial review when the petitioner has not availed himself of the opportunities open to him to influence or challenge it.

[42] For the avoidance of doubt, I should make it clear that both the annual report of the RMO and the decision of the tribunal appear to confirm that the petitioner continues to benefit from treatment—a multidisciplinary approach including nursing care and psychological therapies—which is only available to him within the State Hospital. It follows, in my opinion, that even if the petitioner’s legal arguments were correct, and that he could not lawfully be detained in a mental institution when there was no treatment available there for his condition, the point has not yet come when he could on that account be released or transferred. To that extent this petition would in any event fail on the facts.

[43] Article 3 provides that no one shall be subjected to inhuman or degrading treatment. In Ilascu v Moldova and Russia the Strasbourg Court reiterated the general principles applicable to cases of inhuman or degrading treatment. In particular, it reiterated that the court has deemed treatment to be “degrading” because it was such as to arouse in the victims feelings of fear, anguish and inferiority capable of humiliating and debasing them: see para.425. It explained further, however, at para.428, that the suffering and humiliation involved “must in any event go beyond the inevitable element of suffering or humiliation connected with a given form of legitimate treatment or punishment”.

[44] The detention of the petitioner in the State Hospital is lawful according to domestic law and is compliant with the petitioner’s Convention rights under art.5(1)(e). Detention in a mental institution will inevitably give rise to the possibility that the person detained will succumb to feelings of anguish, inferiority and humiliation. But unless it can be said either that the detention is illegitimate or that the treatment of the petitioner within the State Hospital goes beyond what is necessary, then there is no basis for a complaint under art.3. I have already held that the detention is legitimate. The petitioner does not aver any circumstances of his treatment taking his case beyond the inevitable element of suffering and humiliation inevitably involved in such detention. The claim based upon art.3 must therefore fail.

A

Decision

F

[45] For these reasons I am satisfied that there is no merit in the petition. I do not find that the relevant provisions of the 2003 Act are incompatible with the ECHR. I do not find that the petitioner has been subjected to degrading treatment in terms of art.3. I do not find that the petitioner’s Convention rights have been breached due to the absence of a statutory regime for the transfer of persons from hospital to prison. I refuse to ordain the Scottish Ministers to order the petitioner to be transferred to a prison. I do not find the petitioner’s Convention rights to have been breached by the Scottish Ministers by detaining him in a hospital. The question of damages does not arise.

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384 A

Johnstone, Petitioner (OH)

2016 S.C.L.R.

[46] I refuse the petition. There is no need for a second hearing. I shall reserve all questions of expenses.

For the petitioner: McCluskey, Aitken, instructed by Drummond Miller LLP, Solicitors, Edinburgh.

For the respondents: Springham, instructed by the Scottish Government Legal Directorate.

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A COURT OF SESSION

4 September 2015

Inner House (Extra Division) Lord Brodie, Lady Dorrian and Lord Malcolm.

SWIFT ADVANCES PLC

Pursuers (Respondents)

B

against JAMES BAIN MARTIN AND OTHERS

Defenders (Appellants)

Heritable property—Standard security—Action for repossession of residential property—Disputed value of property—Pursuers wishing to recover property and sell on open market—Defenders offering settlement based on lower valuation—Whether reasonable to grant decree—Conveyancing and Feudal Reform (Scotland) Act 1970 (c.35), s.24A(5)—Home Owner and Debtor Protection (Scotland) Act 2010 (asp 6) The defenders, Mr and Mrs James Martin, borrowed £426,000 from the pursuers secured over residential property and failed to keep up the repayments. There was a prior standard security in favour of Britannia Building Society, which was also in arrears. Mr Martin had been sequestrated.

The pursuers raised an action for possession of the property in the sheriff court and the sheriff granted possession of the subjects in order to sell them on the open market. At the time the arrears were £182,500 and the total amount outstanding was £638,000. The defenders appealed to the sheriff principal who refused the appeal; the defenders appealed to the Inner House.

The issues in the case were whether the pursuers had complied with the pre-action requirements set out in s.24A of the 1970 Act and whether, in terms of the pre-condition set down in s.24(5) it would be reasonable in all the circumstances to grant the orders sought.

The defenders were unable to keep up the payments for the subjects which formed part of larger subjects the other part of which was owned by their daughter and son-in-law; there was a shared roof and driveway. The defenders relied on income from their pensions. Their daughter and son-in-law were prepared to purchase the subjects on the basis of a valuation obtained from DM Hall chartered surveyors in October 2010 which brought out a valuation of £350,000, considerably below a valuation obtained three years earlier from different surveyors at the time of the loan; a more recent survey by DM Hall indicated a value of £300,000.

There had been lengthy correspondence between solicitors for the pursuers and defenders in which the pursuers’ solicitors indicated a valuation of £600,000 and the defenders’ solicitors sought to settle the matter on the basis that the Hendersons would offer to purchase the subjects at the valuation set out in the report by DM Hall. During the correspondence the daughter and son-in-law claimed that access to the subjects could be exercised only with the consent of the owners of their property and time was spent trying to obtain the original titles so as to be in a position to check the true value. In due course an offer was received from the daughter and son-in-law to purchase the subjects for £300,000 but the pursuers re-raised their action.

The grounds of appeal were that the pursuers did not comply with the action requirements set out in s.24A of the 1970 Act, as amended, as explained

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in the Applications by Creditors (Pre-Action Requirements) (Scotland) Order 2010, that orders could only be granted if the court were satisfied that it was reasonable in the circumstances to do so.

It was argued on behalf of the defenders that a creditor had to make reasonable efforts to agree with the debtor proposals in respect of future payments under the standard security in terms of s.24A(3) of the 1970 Act and the pursuers had not done so. They had also raised the action at a time when the defenders were taking steps towards selling the subjects to their daughter and son-in-law and that was contrary to s.24A(4)(a).

Counsel for the defenders argued that the pursuers had to demonstrate that there would be some financial advantage flowing from an open market sale and required to give some reason for their failure to agree the DM Hall valuation and it was unreasonable to say that the pursuers would not accept anything less than full payment.

Counsel for the pursuers argued that the 2010 Order was directed at the mechanics of communication between the parties not the substance of their discussions and s.24A(3) was also directed towards the mechanics of pre-action communications not with an assessment as to whether any proposal put forward was reasonable. There had been no rush to court by the pursuers. The term appropriate price meant a price which would satisfy the debt but here there was common ground that there would be a shortfall.

Held (1) that in the course of extensive negotiations at no time had the pursuers been presented with a proposal which had involved an alternative method of repayment of the defenders’ debt in full, nor could there have been such a proposal and what was done far exceeded anything which would have been required to meet the needs of s.24A and it followed that there was no bar to the raising of the instant court proceedings (para.30); (2) that the sheriff principal correctly concluded that the parties had made reasonable efforts to reach an agreement which failed and the pursuers as creditor sufficiently complied with the pre-action requirements set out in s.24A(3) of the 1970 Act and correctly rejected a submission that the proposed private sale to the daughter and son-in-law was a reasonable step of the kind mentioned in s.24A(4) (para.31); and (3) that been nothing untoward or unreasonable about the conduct of the pursuers which had showed remarkable patience and tolerance even when faced with somewhat intemperate correspondence and given the very large gap between the valuations obtained by the pursuers and their view of the value of the subjects on the one hand and the DM Hall valuations on the other hand it would have been wholly unreasonable to have dismissed the action simply because expert evidence had not been led by the pursuers at the proof and given the lengthy history and the amount of the outstanding monthly payments and principal sum it was clear that the lender was entitled to obtain possession of the subjects and seek to achieve the best possible price by advertising on the open market (paras 41, 42); and appeal refused.

Cases referred to:

F

Accord Mortgages Ltd v Cameron [2013] CSIH 31 Cheltenham and Gloucester plc v Krausz [1997] 1 W.L.R. 1558; [1997] 1 All E.R. 21 Palk v Mortgage Services Funding plc [1993] Ch. 330; [1993] 2 W.L.R. 415; [1993] 2 All E.R. 481.

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 4 September 2015.

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Swift Advances plc v Martin (IH)

387

LORD MALCOLM [1] In 2007 Mr and Mrs James Martin borrowed £426,000 from Swift Advances plc (Swift) secured over a residential property. The terms included 300 monthly repayments of £4,127. Against a background of continuing non-payment of the monthly sums, in January 2012 Swift served calling-up notices. Later that year proceedings were commenced in Kilmarnock Sheriff Court in terms of the Conveyancing and Feudal Reform (Scotland) Act 1970, as amended by the Home Owner and Debtor Protection (Scotland) Act 2010.

The action sought power to enter possession of the subjects and exercise all rights available to the creditor, including sale. As at the date of the proof, the arrears amounted to £182,500, equivalent to over 42 months. The outstanding balance was in the order of £638,000.

[2] The main issues before the sheriff were (1) whether Swift had complied with the pre-action requirements set out in s.24A of the 1970 Act, and (2) whether, in terms of the pre-condition set down by s.24(5), it would be reasonable in all the circumstances to grant the orders sought. The sheriff answered both questions in the affirmative and found in favour of Swift. An appeal to the sheriff principal on both issues was refused. Now this court is asked to find for the debtors on one or both of said issues, and to set aside the sheriff’s interlocutor. In outlining the background, since much turns upon communications between the parties’ solicitors before the commencement of the current proceedings, they will be recorded in some detail.

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The background circumstances

[3] Mr and Mrs Martin are the joint owners of the subjects. Mr Martin is sequestrated. He does not enjoy good health. Previously Mrs Martin had little to do with their financial affairs, but in 2008 she discovered papers indicating that they were in arrears on the mortgage. They were unable to make consistent or regular payments, and so, over time, the arrears increased. The subjects form part of a larger property, of which the other part is owned and occupied by their daughter and son-in-law, Natalie and Douglas Henderson (the Hendersons). There is a shared roof and driveway. Consideration was given to putting the subjects on the open market, but the anticipated estate agents’ fees could not be paid. There is a prior standard security in favour of the Britannia Building Society, and the Martins were in default in respect of both arrangements. They are in receipt of pension income only, and, leaving aside the said subjects, have no funds to meet their obligations to Swift. Their daughter and son-in-law have tried to assist with their financial affairs, and were prepared to purchase the subjects on the basis of a valuation prepared by Messrs DM Hall, chartered surveyors. Such a report was obtained in October 2010, which brought out a valuation of £350,000, a sum considerably below the valuation of £750,000 obtained from different surveyors some three years earlier at the time of the loan. A more recent DM Hall report of July 2012 indicated a value of £300,000.

[4] So far as the pre-action communications are concerned, the available documentation begins with a letter dated 4 October 2010 from Mr Smith, solicitor, of Clarity Law on behalf of the defenders, to Mr Lang, of Messrs Mellicks, solicitors, acting on behalf of Swift. At that time there was an earlier outstanding action at the instance of Swift against the defenders in Kilmarnock Sheriff Court, also for possession of the subjects and other relevant powers.

Mr Smith had recently been instructed in place of other solicitors who had been acting for Mr and Mrs Martin. Mr Smith noted that in Swift’s most

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recent letter to those solicitors they had indicated a current market valuation of the subjects of £600,000. He asked for a copy of that valuation. A contemporary email from Mr Smith to Mr Lang stated that Mr Smith was going to suggest to his clients that a full home report be conducted by DM Hall to “provide a clear market valuation”. Their daughter and son-in-law had advised him that they may be able to purchase the subjects, depending upon the market value. The next day Mr Smith forwarded a letter to Mr Lang advising that the Hendersons would offer to purchase the subjects at the valuation set out in the report. In response, Mr Lang made reference to a drive-by valuation at a figure of £600,000 carried out on behalf of Swift. He did not have a copy of this on his file.

[5] Mr Smith sought to negotiate a resolution of the sheriff court proceedings upon the basis that the defenders would accept an offer from the Hendersons based upon the DM Hall report, and use the proceeds “to pay the securities to both your client and the first charge-holder”. Once in receipt of the available funds, it was suggested that Swift would “provide the defenders with the usual discharge of loan”. In the meantime 50 per cent of the monthly repayments would be made.

[6] On 28 October 2010 Mr Lang responded by stating that various matters required to be clarified, and, for the avoidance of doubt, that his clients would not accept anything less than payment in full before granting a discharge. He suggested that the first step towards resolving the matter was for the home report to be produced. “Once the valuation is known we can ascertain how that plays into your clients’ indebtedness to Swift.” Thereafter, so long as Swift were to be paid in full, the solicitors could turn to the purchase transaction proposed by the Hendersons.

[7] Some of the correspondence is missing from the productions, but in due course the home report was obtained stating a valuation of £350,000.

Mr Lang contrasted this with the mortgage rights minute in which the debtors ascribed a value of £750,000 to the subjects. He was taking instructions from his clients. He rejected a time limit which had been proposed by Mr Smith, commenting that it would simply “polarise positions”. On 6 December Mr Smith responded by indicating that his clients would withhold the interim mortgage payments, which it was intended would be provided by the Hendersons, “until such time as your client is in a position to fundamentally provide clarification over their position”. This ultimatum was thought to be appropriate since it was unclear whether Swift did or did not intend to repossess. Mr Lang replied to the effect that there could be no repossession any time soon, and that a failure to maintain the monthly payments would “simply make a bad situation worse”. In the event the interim payments were withheld unless and until there was a decision to avoid repossession. Mr Smith urged a decision from Swift by close of business on 23 December 2010, otherwise no further payments would be made and the defenders would seek alternative accommodation.

[8] Come January 2011 no such decision had been taken, and the case was continuing to call in Kilmarnock Sheriff Court. In the light of “ongoing settlement discussions” Mr Smith suggested a sist of the case. While the exact details are not clear, it is apparent that the original action was ended with a view to exploring a resolution without the need for further litigation.

[9] On 23 March 2011 Mr Lang wrote to Mr Smith stating that his clients were surprised and concerned as to the value placed upon the subjects in the DM Hall report. In addition, Natalie Henderson had suggested to Swift that there was a problem with access to the subjects, in that access could be

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2016 S.C.L.R.

Swift Advances plc v Martin (IH)

389

exercised only with the consent of the owners of their property. “This is obviously a matter which our clients require to clarify.” Mr Lang had obtained extracts of the title deeds, together with the standard security in favour of the Britannia Building Society. However the plans were in black and white, which limited their value. Mr Lang expressed certain views as to the effect of the deeds as to rights of access and the like. He ended by stating that it would be in everyone’s interests that the extent of the respective properties and the rights of access be clarified. He asked Mr Smith to obtain the principal deeds, including coloured plans, from Britannia, who, as holders of the first security, had possession of them.

[10] On 26 April 2011 Mr Smith indicated that, while he had spoken to his clients, he had no instructions to order up the title deeds. However he would speak to them again and revert on the matter. He pressed what he described as “the main issue”, namely that Swift should accept the market valuation offer from the Hendersons and discharge the additional monies due by the defenders. He noted that many months had passed without an answer on this point.

[11] On 16 May 2011 Mr Lang noted that the market valuation would depend upon the rights of access. Swift’s information was that the value of the property was considerably in excess of the valuation placed upon it by DM Hall, however ascertainment of the value of the subjects depended upon the question of access being resolved. The matters raised in the letter of 23 March were relevant to the “main issue” and required to be clarified before matters could be progressed.

[12] On 11 July Mr Smith replied. The first security holders had raised proceedings and a repossession decree had been granted by the sheriff at Kilmarnock. It was understood that they would accept the offer to be made by the Hendersons, and provide the necessary discharge. It was hoped that Swift would do the same. On 27 July Mr Lang observed that the difficulty was the disagreement as to the market value of the property. He reminded Mr Smith as to the request set out in the letter of 23 March. On 2 August Mr Lang wrote to the agents for the Britannia Building Society informing them as to the situation as between Swift and the debtors. This included the dispute as to the assertion that access to the property was limited and subject to the Hendersons’ consent as owners of the adjoining subjects, and it was noted that the Hendersons’ views on market value did not coincide with those of his clients.

[13] On 4 August 2011 Mr Smith asked Mr Lang for vouching as to Swift’s disagreement as to the market valuation. On 22 August he said that the Hendersons would be submitting a purchase offer in the near future. On 30 August he asked why Swift had not instructed its own valuation. Britannia had extracted its decree and a decision from Swift was required as a matter of urgency, given that a market value offer would be made. Failing a substantive response within seven days, attention would be turned towards the Financial Services Authority. On 30 August Mr Lang observed that Swift’s concern as to market value was based upon their belief that Mr Smith’s clients may have misinterpreted the titles of the adjoining property. This had been the subject of the letter in March to which there had been no substantive response. He stressed that the security would only be discharged if Swift were satisfied that the property was sold for its correct value. To facilitate this Mr Smith should respond to the letter of 23 March. Letters having crossed, Mr Lang wrote again on 31 August reiterating that, at least in part, Swift’s concern was that the low valuation was caused by the view taken as to access rights, a view which was not shared by his clients. The earlier J & E Shepherd valuation

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2016 S.C.L.R.

report obtained by Swift when the loan was advanced was considerably higher than the DM Hall valuation. Again reference was made to the letter of 23 March. It would only be when this issue was clarified that the valuation would be instructed. To allow matters to be resolved quickly, Mr Smith was invited to provide his response to that letter.

[14] On 23 September 2011 Mr Smith began the latest item of correspondence by saying that the situation in the case was “becoming incredulous”. It was for Swift to disprove DM Hall’s valuation. He called on Mr Lang to provide details within 14 days of the surveyors nominated by Swift, otherwise the only recourse would be to the Financial Services Authority Ombudsman. Notwithstanding the tone of Mr Smith’s letter, Mr Lang replied in moderate terms on 10 October, agreeing that the appointment of surveyors to value the property was desirable, however a meaningful instruction and valuation could not be obtained until the extent of the second property, and the access rights enjoyed by it, had been clarified. A lot of time had been lost since the letter in March, but if the principal title deeds could be obtained by Mr Smith, it was hoped that the matter could be resolved in early course.

[15] On 28 October Mr Smith replied that he was endeavouring to obtain the principal title deeds. On 1 December, Mr Smith was asked whether the deeds had been obtained. Swift were becoming concerned as to the equity situation and had advised that unless prompt progress was made they would have to raise proceedings. By this stage Mr Brendan Collins was dealing with the matter at Mellicks. On 13 December Mr Smith told him that electronic copies of the titles for the two properties had been obtained. They did not match. As a result he required to approach Britannia for the original titles. He understood that Swift were pressing Mellicks to proceed with a repossession.

He stated that in all the circumstances he could not stop this occurring.

However he suggested that such “would be nothing short of your clients shooting themselves in the foot”. Mr Collins replied that calling-up notices were being served, however, the two-month period would allow time for Mr Smith to obtain the titles from Britannia and for these to be examined with a view to resolving the boundaries issue. In the event, by letter of 16 March 2012 Britannia told Mr Smith that they were unable to send the deeds to him because he was not on their panel of conveyancers at the address in his letter.

He would require to submit a written request to be added to their panel.

[16] There followed some correspondence concerning whether Swift was or was not acting reasonably by proceeding to repossession. In a letter of 17 May 2012 Mellicks noted that for over 20 months no payments had been made to reduce the ever-increasing arrears. Given the level of the arrears the service of calling-up notices was said to be entirely reasonable. On 20 April 2012 Swift had informed Mr and Mrs Martin that on the expiry of the calling-up notice period they would instruct the issue of proceedings seeking repossession of the property. The extent of the arrears and the outstanding balance were mentioned. It was not too late for them to seek an accommodation with Swift, and they could obtain advice from any Scottish solicitor or any Citizens Advice Bureau or similar organisation. Mr Smith wrote to Mellicks objecting to that direct communication. An issue was raised as to the competency of the method of service of the calling-up notices, however nothing now turns upon this. On 4 July 2012 the Hendersons, through their solicitors, submitted an offer to the debtors to purchase the subjects for £300,000. None of this prevented Swift from re-raising court proceedings.

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Swift Advances plc v Martin (IH)

391

The grounds of appeal

A

[17] The first and second grounds of appeal contend that Swift did not comply with the pre-action requirements introduced in 2010 and set out in s.24A of the 1970 Act, as amended. (Identical provisions were added to the Heritable Securities (Scotland) Act 1894.) Further provision as to what is required to satisfy the requirements is specified in art.3 of the Applications by Creditors (Pre-Action Requirements) (Scotland) Order 2010 [SSI 2010/317]. The third ground of appeal relies on the requirement set down in s.24(5)(b) of the 1970 Act that orders can only be granted if the court is satisfied that it is reasonable in the circumstances to do so.

B

The submissions on grounds of appeal 1 and 2

[18] In the note of argument lodged in support of grounds of appeal 1 and 2, three propositions are put forward.

1. It is a pre-action requirement that a creditor must make “reasonable efforts to agree with the debtor proposals in respect of future payments to the creditor under the standard security and the fulfilment of any other obligation under the standard security in respect of which the debtor is in default”: s.24A(3) of the 1970 Act. Properly construed, the proposal to sell the property to the Hendersons at a price determined in accordance with independent and professional advice as to the market value of the subjects was a proposal within the meaning of this pre-action requirement.

2. Swift did not make “reasonable efforts to agree” to the proposal.

3. In any event, it is a pre-action requirement that the creditor must not make an application if the debtor is taking steps likely to result in: “payment to the creditor within a reasonable time of any arrears, or the whole amount, due to the creditor under the standard security; and (b) fulfilment by the debtor within a reasonable time of any other obligation under the standard security in respect of which the debtor is in default”: s.24A(4)(a) of the 1970 Act. Properly construed, the steps being taken towards selling the property to the Hendersons were steps within the meaning of that requirement.

[19] In elaboration of the above, the note of argument contends that the relevant statutory provisions do not state that the proposals made by the debtor must be comprehensive or provide for the payment of the whole of the sums due under the standard security. It is accepted that in many cases proposals for partial payment are likely to be inherently unreasonable and incapable of acceptance by the creditor. However this is not automatically the case. Here the proposal put forward by the Hendersons would have led to partial payment of the sums due under the standard security. Thus the pre-action requirements in the 1970 Act were engaged. This is consistent with the overall purpose of the changes introduced by the 2010 Act, which were aimed at ensuring that creditors used repossession proceedings as a last resort, and only after all other reasonable alternatives had been explored. Such could include a negotiated sale by the debtor of the property. Article 4(1)(c) of the 2010 Order only states that the property be marketed at an “appropriate price in accordance with professional advice”. If a reasonable offer is made following upon marketing at an appropriate price, the debtor must accept that offer: art.4(4). It was submitted that often there will be numerous reasons why, in circumstances where a sale of the secured subjects is inevitable, a privately negotiated sale by the debtor at market value is likely to be a preferable alternative to repossession.

5246.indd 391

C

D

E

F

G

03/09/16 1:18 PM

392 A

B

C

D

E

F

G

5246.indd 392

Swift Advances plc v Martin (IH)

2016 S.C.L.R.

[20] In oral argument, MrYoung stressed that the bank needs to demonstrate that there would be some financial advantage flowing from an open market sale. The Hendersons were prepared to offer the market value for the subjects, as vouched by the DM Hall report. However, according to Mr Young, there was no engagement by the creditors with the idea of an open market procedure.

Swift simply said that it did not agree with the DM Hall valuation. Swift was obliged to give reasons for their refusal. They should have reverted with a competing valuation. Mr Young suggested that the solicitor for Mr and Mrs Martin was faced with “a brick wall”, with everything “bouncing off it”. On any view there was no prospect of 100 per cent recoupment from the sale of the property. The outstanding arrears were almost £700,000. There was a first charge security holder, and Mr Martin had been sequestrated. It was unreasonable for Swift’s solicitors to say that their clients would not accept anything less than payment in full. The correspondence demonstrated that there had been no reasonable efforts to agree to the debtors’ proposals. Swift “were intransigent”.

[21] Reference was made to the final report of the repossessions group set up by the Scottish Government in advance of the 2010 Act. The group’s recommendations were aimed at ensuring that, once problems emerge, the debtor in respect of residential (as opposed to commercial) borrowings has every reasonable opportunity to sustain homeownership, or to retain the home through some other arrangement, for example as a tenant. The government was encouraged to take steps to amend the primary legislation to require lenders to show that they had considered every reasonable alternative to repossession of residential property, and for the courts to consider the extent to which they had done that when deciding upon repossession cases. Reference was also made to the guidance issued by the Scottish Government on the new pre-action requirements. It is clear that proceeding with a court application for possession was viewed by the Scottish Ministers as “the last resort”. Thus the creditor must be prepared to demonstrate compliance with the pre-action requirements. All reasonable attempts to resolve the position should be explored before court proceedings are raised.

[22] Mr Young stated that “fundamentally” he challenged the proposition that it would always be reasonable for the creditor to seek to recover all of the debt. It would of course be legitimate to maximise recovery. However here the proposal was to pay market value. If a creditor disputed the market value, he had to explain his position. There had to be reasonable efforts to reach an agreement. Swift was not entitled to keep its position to itself. Mr Young submitted that Swift did no more than say that they were not prepared to agree to the valuation. The position adopted regarding access problems was “not logical”. The DM Hall valuation was not based upon any express mention of access problems. Essentially the legislation lays down something equivalent to a “reasonable endeavours to agree” test. If the creditor has no good reason to refuse a proposal, it cannot raise court proceedings.

[23] For Swift, Mr O’Brien observed that the contention is that Swift unreasonably rejected the appellants’ proposals. The 2010 Order is directed to the mechanics of communication between the parties, not to the substance of their discussions. The sheriff was fully entitled to conclude that Swift had made “reasonable efforts” within the meaning of s.24A. No realistic proposal had emanated from the debtors. As the sheriff principal observed, the “reasonable efforts” test addresses whether the creditor has made reasonable and genuine efforts to engage in settlement discussions, not whether a particular offer ought to have been accepted.

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2016 S.C.L.R.

Swift Advances plc v Martin (IH)

393

[24] Mr O’Brien stressed that s.24A(3) is directed towards the mechanics of pre-action communications, not with an assessment as to whether any proposal put forward was reasonable. That becomes relevant under the overall reasonableness test set out in s.24(5). The 2010 Order reinforces this interpretation. On any reasonable reading of the correspondence, it is clear that Swift was not intransigent. By August 2011 it was recognised that there would be a shortfall, thus the bank was not insisting upon full repayment. A genuine issue arose as to potential access problems and the need for the principal title deeds. The action was raised because it became clear that the parties were “going round in circles”—no progress was being made. There was no rush to court. It was entirely reasonable for Swift to see the access issue as a possible explanation for DM Hall’s low valuation.

[25] Turning to s.24A(4), Mr O’Brien submitted that this provision is not concerned with a proposal to sell at a shortfall. In such cases the creditor cannot be obliged to discharge the security. Article 4(3) of the 2010 Order suggests that the pre-action requirements cannot block court proceedings where there will be a shortfall. In terms of art.4(1)(c), “appropriate price” means a price which will satisfy the debt. It was common ground that there would be a shortfall.

B

C

Decision on grounds of appeal 1 and 2 [26] Section 24A(3), when read along with the terms of s.24, required Swift, before it could raise the proceedings, to: “make reasonable efforts to agree with the debtor proposals in respect of future payments to the creditor under the standard security and a fulfilment of any other obligation under the standard security in respect of which the debtor is in default”.

D

Section 24A(4) provides that no application to the court can be made: “[I]f the debtor is taking steps which are likely to result in— (a) the payment to the creditor within a reasonable time of any arrears, or the whole amount due to the creditor under the standard security; and (b) fulfilment by the debtor within a reasonable time of any other obligation under the standard security in respect of which the debtor is in default.”

E

In pursuance of the power granted by s.24A(8) the Scottish Ministers made the 2010 Order. So far as the requirement to make reasonable efforts to agree proposals is concerned, art.3 requires the creditor to make reasonable attempts to contact the debtor; provide him with details of any proposal made by the creditor; give him a reasonable time for consideration for any such proposal; notify him of the creditor’s view of any proposal made by him; and take into the account the affordability of any proposal for the debtor. Written reasons for the rejection of any proposal made by the debtor must be provided within ten working days. As to s.24A(4), art.4 provides that steps likely to result in payment within a reasonable time include a claim to an insurer under a payment protection policy; an application to a government support scheme; and active marketing of the property for sale at an appropriate price in accordance with professional advice.

[27] Nothing in the above provisions prevents court action if, after appropriate communications, it is clear that the debtor simply cannot comply with his obligations in full. The pre-action requirements introduced by the

5246.indd 393

A

F

G

03/09/16 1:18 PM

394 A

B

C

D

E

F

G

5246.indd 394

Swift Advances plc v Martin (IH)

2016 S.C.L.R.

2010 Act in respect of residential borrowing are designed to ensure that there is a genuine exploration of the possibility of an arrangement being reached whereby, in due course, the default can be remedied, albeit this may require indulgence on the part of the creditor. The whole tenor of s.24A(3) and (4) is of discussions aimed at an alternative agreement whereby the debtor’s obligations can be fulfilled, for example, on the basis of a lower monthly payment extending over a longer period. There is nothing to suggest that a proposal to pay only a fraction of the sum due must be accepted, or that it can stop the raising of court proceedings. This is consistent with the government guidance, which provides assistance on what the reasonable creditor is expected to do, for example, extend the repayment period; change the type of repayment from interest plus capital to interest only; or capitalise the arrears on the security. The process must be carried out in a reasonable and unhurried manner, using “plain English”. If a court action is raised, the guidance provides that the creditor must be in a position to establish that he has complied with the pre-action requirements.

[28] Whatever else, the extensive correspondence between the respective solicitors, and indeed the whole background circumstances, demonstrate that there was never any prospect of the debtors being able to put forward a realistic or reasonable arrangement whereby their financial obligations could be fulfilled. In these circumstances the various criticisms made of the position adopted by Swift in the course of that correspondence are of secondary, if any, importance to the question of compliance or otherwise with the pre-action requirements in s.24A. [29] In truth the correspondence taking place between October 2010 and mid-2012 reflected an attempt to reach a negotiated settlement of the claim for possession raised in the first sheriff court action. It is somewhat artificial to view it through the lens of the pre-action requirements. Essentially Swift was presented with a “take it or leave it” offer that it be satisfied with whatever was left after Britannia had been paid for the proceeds of a sale at £350,000— subsequently reduced to £300,000—all in respect of a debt approaching £700,000. Swift made it clear that this was not satisfactory, principally because it fell well below their valuation of the subjects. However, if it could be shown that there were access problems which diminished the value of the security subjects, then Swift would be prepared to reconsider and instruct their own fresh valuation.

[30] Swift were not even met with a proposal to put the subjects on the open market. Instead there was lengthy procrastination in respect of the requests set out in Mr Lang’s letter of 23 March 2011, and a dogmatic insistence upon acceptance of the Hendersons’ proposal. In the course of the extensive negotiation between the solicitors for the parties, at no stage were Swift presented with a proposal which involved an alternative method of repayment of the defender’s debts in full—nor, in the circumstances, could there be such a proposal. What was done far exceeded anything required to meet the needs of s.24A. It follows that there was no bar to the raising of the current court proceedings.

[31] The above mirrors much of the reasoning of the sheriff on this topic.

In addition, the sheriff principal was well founded in his suggestion that the pre-action requirements were aimed at a prevalent situation, far removed from the present case, where: “creditors proceeded rapidly on a debtor’s default to a calling up of the standard security and a raising of proceedings in court without any real communication with the debtor and little or no attempt to achieve some

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2016 S.C.L.R.

Swift Advances plc v Martin (IH)

395

accommodation which might enable the debtor to continue in occupation of the security subjects on a mutually agreed basis with an adjusted payment regime”.

The sheriff principal was correct to conclude that, through their solicitors, both parties: “made reasonable efforts to reach an agreement . . . albeit they failed in those efforts, and that the pursuers as creditor therefore sufficiently complied with the pre-action requirements set out in section 24A(3) of the 1970 Act”.

A

B

He also correctly rejected a submission that the proposed private sale to the Hendersons was a reasonable step of the kind mentioned in s.24A(4). Grounds of appeal 1 and 2 fall to be rejected.

Ground of appeal 3

[32] The final ground of appeal concerns s.24(5) of the 1970 Act (again introduced by the 2010 Act) which provides that decree cannot be granted unless it is reasonable in the circumstances of the case to do so. Regard is to be had to the factors set out in s.24(7) of the Act. The proposition for the debtors is that the focus ought to be on whether Swift could obtain a materially better price from the property than that available from the Hendersons’ proposal. Neither the sheriff nor the sheriff principal dealt with this issue, and therefore they both erred in law. It is submitted that the test of reasonableness is to be considered in the context of the wider purposes of the amendments introduced by the 2010 Act. If there is no realistic prospect of a better price than that available from the Hendersons, it would be neither fair nor reasonable to allow Swift possession of the subjects and the power to sell them. Swift called no valuation evidence at the proof to contradict the terms of the DM Hall reports. It should therefore be assumed that the DM Hall valuations were accurate. In any event, there was no evidence to the contrary. The assertion by an employee of Swift that the property index showed a higher valuation is not a sufficient foundation. There is no good reason to suppose that an open market sale will achieve a higher value.

[33] Mr Young suggested that an analogy can be drawn with the approach in England and Wales when dealing with applications by mortgagees under s.91(2) of the Law of Property Act 1925 to sell a property against the wishes of the mortgagor in cases of negative equity. Reference was made to various decisions from south of the border, including Palk v Mortgage Services Funding plc at pp.337–341 and Cheltenham and Gloucester plc v Krausz, both decisions of the Court of Appeal.

[34] It was submitted that the sheriff and the sheriff principal placed disproportionate weight on the amount of the arrears and the fact that the proposed sale would not clear them. Reliance was also placed on the alleged unreasonableness of Swift’s position in the aforesaid correspondence. The refusal of Swift to provide any support for its assertion that the DM Hall value was too low had unreasonably frustrated the Hendersons’ initiative. Mr Young contended that there is no fair and rational basis for Swift’s desire to exercise its power of sale.

[35] For Swift, Mr O’Brien noted that, once again, the basic contention is that, instead of an open market sale, Swift should have accepted the Hendersons’ offer. The reasonableness test is discretionary, and the usual principles on appeal apply (Accord Mortgages Ltd v Cameron at para.3).

5246.indd 395

C

D

E

F

G

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396 A

B

C

D

Swift Advances plc v Martin (IH)

2016 S.C.L.R.

Mr O’Brien noted that s.24(7)(b) requires the court to have regard to “the ability of the debtor to fulfil within a reasonable time the obligations under the standard security”. The sheriff noted the arrears, the outstanding sums, and the inability of the defenders to meet their obligations. The sheriff accepted evidence that Swift, after applying the Halifax Price Index, was of the view that the subjects’ value was significantly higher than that suggested by DM Hall, and that, in any event, the best price is usually obtained after marketing: finding 18.

[36] In these circumstances Mr O’Brien submitted that it would have been unreasonable to refuse to grant the orders sought. Decree would allow Swift to test the market. Section 25 of the 1970 Act obliges a heritable creditor to advertise a sale and take all reasonable steps to ensure that the subjects are sold at the best price. The Act assumes that this involves marketing of the property. This is in the best interests of both the debtor and the creditor.

Mr O’Brien stressed that, in the whole circumstances, Swift was entitled to be sceptical, and to test the market. Emphasis was placed upon finding in fact 18, which allowed the sheriff to conclude that there was a realistic possibility of a better price if the subjects were advertised in the usual way. If they wished, the Hendersons could submit a bid.

[37] Mr O’Brien discussed the English cases and, in general, submitted that they provide no relevant or helpful guidance in the circumstances of the present case. They were all decided upon their particular facts. The Cheltenham & Gloucester case was perhaps the closest to the present on the facts.

[38] In the courts below, the sheriff noted that none of the factors specified in s.24(7) of the Act is of any assistance to the defenders. The offer of £300,000 was unlikely to be acceptable to Swift, who valued the subjects at, at least, £500,000. They were under a statutory obligation to obtain the best price, and were of the view that this was best achieved by a sale on the open market. The proposed sale to the Hendersons would leave a substantial shortfall which the defenders could not address. Like the sheriff, the sheriff principal was of the view that it would be reasonable for the court to grant the application.

Decision on ground of appeal 3

E

F

G

5246.indd 396

[39] On this aspect of the case, the submissions on behalf of Swift are well founded and are to be preferred. There is no sufficient reason to interfere with the decisions in the courts below. In the whole circumstances, including the pre-action correspondence summarised earlier, it cannot be said that it would be unreasonable for the court to sanction possession of the subjects and their sale on the open market by Swift. As discussed earlier in the context of the other grounds of appeal, the changes introduced by the 2010 Act were not designed to limit a creditor’s contractual entitlement to recover the full debt, nor to prevent steps designed to maximise the recovery.The 2010 Act protected against unreasonable conduct adopted by a creditor in pursuing that objective.

[40] The circumstances here are that Swift was faced with an insistence that it should discharge the debtors’ obligations in return for a fraction of the indebtedness (the amount due to the first charge holder was never fully explored), all based on an offer which fell far below earlier expert valuations, and also Swift’s own valuation. Nevertheless it remained willing to obtain a new valuation if it could be given clear evidence on the true state of the titles.

It is understandable that Swift lost patience and resumed the court proceedings.

The purpose was to allow Swift to test the market. In the circumstances there was no burden on Swift to prove that a sale would achieve a higher price than the DM Hall valuation. Mr O’Brien correctly observed that there are provisions

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in the Act reflective of the widely held view that an open market sale is likely to produce the best price. All of this is supported by the sheriff’s findings in fact, not least finding 18, none of which were challenged.

[41] Contrary to the submission of Mr Young, there has been nothing untoward or unreasonable in the conduct of Swift. Indeed, they showed remarkable patience and tolerance, even when faced with somewhat intemperate correspondence. Had Mr Smith taken timeous and effective steps to recover the principal title deeds, it is possible that further litigation would have been unnecessary. Given the very large gap between the valuations obtained by Swift and their view of the value of the subjects on the one hand, and the DM Hall valuations on the other hand, it would be wholly unreasonable to dismiss the action simply because expert evidence was not led by Swift at the proof.

[42] It might have been different if at any stage the debtors had offered to put the subjects on the market themselves. Given the lengthy history, and the amount of the outstanding monthly payments and principal sum, it is clear that the lenders are now entitled to obtain possession of the subjects and seek to achieve the best possible price by advertising on the open market.

[43] For completeness, it should be recorded that the English decisions have not been overlooked. They arose in a different jurisprudential and statutory context, and each case turned upon its own particular facts. The circumstances of the Cheltenham and Gloucester case are remarkably similar to the present, and the court’s decision is of no assistance to the appellants. On the contrary, the emphasis was on the mortgagee’s right to enter possession and exercise its rights in circumstances of negative equity, unless other funds were available to make good the shortfall.

[44] For the above reasons the appeal is refused, and the court adheres to the interlocutors in the courts below.

A

B

C

D

For the pursuers: O’Brien, instructed by Ledingham Chalmers LLP, Solicitors, Edinburgh.

For the defender: Young, instructed by Drummond Miller LLP, Solicitors Edinburgh.

E

F

G

5246.indd 397

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A COURT OF SESSION

11 September 2015

Inner House (Extra Division) Lady Paton, Lady Dorrian and Lord Drummond Young B

RICHARD BISHOP

Pursuer (Respondent)

against 3i INVESTMENTS PLC

Defenders (Reclaimers)

Partnership—Construction of contract—Partner in limited partnership leaving—Provision that leaving partner may retain investment in partnership unless defined as “competing leaver”— Whether pursuer “competing leaver” C

D

E

F

G

The pursuer was employed by the defenders for a number of years, ultimately as head of the company’s global growth capital portfolio. It was the practice of the company to set up limited partnerships in which senior employees became partners, contributing their own funds, which were then invested by the limited partnership for the purpose of rewarding the employees for services to the group. The pursuer was involved in seven such limited partnerships and invested approximately £350,000 of his own money in them.

On leaving the group an employee was entitled to retain his investment in the limited partnerships unless he was classified as a “competing leaver” in terms of the partnership agreements. If that was so, he was entitled only to a restricted payment for his share in each such limited partnership. The company classed the pursuer as a competing leaver and offered him approximately £90,000 on his departure. The pursuer raised an action to challenge that decision seeking declarator that he was an ordinary leaver and not a competing leaver in terms of the agreements. The Lord Ordinary answered the question as to whether he was competing leaver in the negative and granted declarator that he was an ordinary leaver. The defenders reclaimed.

The pursuer signed a limited partnership agreement in order to receive what is known as “carried interest” as an incentive. He required to make certain contributions to the capital of the partnership. The agreements specified conditions upon which the right to receive carried interest depended when the employee left his employment. The pursuer resigned on 3 May 2011 and joined another company called Business Growth Fund plc (BGF) as head of investments. He was classed as a competing leaver with the decision being taken by the defenders’ chief executive. At the time when the pursuer left the defenders’ policy was to raise funds by means of a growth capital fund from external sources and to make investments in a range from €25 million to €150 million and in the last five years the company had made only one growth capital investment in the UK. BGF on the other hand, was launched to provide growth capital funding of between £2 million and £10 million to UK small companies and did not take a controlling interest in any company. By the date of the proof it had made 64 investments, all within the stated band.

The Lord Ordinary held that there was no actual competition between the two companies because they operated in quite separate bands or markets.

Nor was there competition for funds because they each funded their operations from completely different sources. There was no competition in relation to staff because 3i had been shedding staff rather than recruiting.The limited partnership agreements all contained a definition of the expression “competing leaver” as: 398

5246.indd 398

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2016 S.C.L.R.

Bishop v 3i Investments plc (IH)

399

“any Ordinary Leaver . . . who at the time of or within 24 months of becoming an Ordinary Leaver (a) takes or is understood to be intending to take employment in a competitive capacity with, or provides competitive services to, a competitor of the manager or any of its associates;’. ... and for these purposes.

(A) without limiting the foregoing, the taking of employment with, or the provision of services to, any business or fund which is deemed to be a competitor pursuant to (B) below (other than where such employment or provision of services is with or to a part of such business not directly or indirectly involved in any relevant operations) shall be deemed for the purposes of (a) above to be taking employment in a competitive capacity of providing competitive services (as the case may be); (B) without limiting the foregoing, any business or fund, wherever located in the world shall be deemed to be a competitor if such business . . . or fund operates or is intended to operate or is likely to operate (whether in whole or in part) in any geographical area(s) and investment products sector(s)/business line(s) (taken together) in which the Manager or any of its Associates operates or, as at the Leaving Date in respect of any such Ordinary Leaver, is proposing to operate within the next 12 months; and (C) ‘relevant operations’/‘operates’/‘operate’ shall mean making dealing in, managing or advising as to unquoted equity investments whether for the relevant business’s own account as principal or as agent, trustee, manager or adviser on behalf of any other person(s).”

Counsel for the defenders contended that the Lord Ordinary erred in law in a number of respects, namely: (1) it was appropriate to give a wide meaning to competition in the circumstances of the case; (2) he had given insufficient weight to the deeming provisions in subpara.(B) of the definition of competing leaver; (3) the notion of actual competition should have been construed broadly; (4) he had misconstrued the provisions relating to deemed competitors; (5) the expression “investment products sector/business line (taken together)” could not be given a meaning if its wording was taken literally, but sense could and should have been made of it by construing it as a reference to the totality of all the different parts of 3i’s business at the date of the contract.

Held (1) that the expression “business line” in the limited partnership agreements was used in the context of competition, which inevitably pointed to the external markets in which the 3i group operated and the expression “business line” was flexible and its meaning was therefore highly dependent on context and the internal use of the expression within 3i did not affect the analysis of its meaning (para.31); (2) that the intention of the definition had been clearly that the issues of competition and the like should have been determined at the time when the clause operated and not when the contract had concluded (para.32); and (3) that the findings in fact clearly justified conclusion that BGF and 3i operated in different markets and it could not be said that there was competition in any significant sense between them and the foregoing applied both to the existence of competition at a general level and to the concept of “investment products sector” and “business line” as used in subpara.(B) of the definition of competing leaver (para.36); and reclaiming motion refused.

Greck v Henderson Asia Pacific Equity Partners (FP) LP [2008] CSOH 2 distinguished.

A

B

C

D

E

F

G

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400 A

Bishop v 3i Investments plc (IH)

2016 S.C.L.R.

Cases referred to: Greck v Henderson Asia Pacific Equity Partners (FP) LP [2008] CSOH 2 Grove Investments Ltd v Cape Building Products Ltd [2014] CSIH 43 Rainy Sky SA v Kookmin Bank [2011] UKSC 50; [2011] 1 W.L.R. 2900; [2012] 1 All E.R. 1137.

B

C

D

E

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 11 September 2015.

LORD DRUMMOND YOUNG [1] Until May 2011 the pursuer was employed by 3i Plc (3i) in various positions, ultimately as head of the company’s global growth capital portfolio and as a member of its growth leadership team. 3i is part of the same group of companies as the defenders and another company, 3i Group Plc, which is the holding company of the group. It was the practice of the 3i group to set up limited partnerships in which senior employees became partners, contributing their own funds, which were then invested by the limited partnership. The intention was to reward the employees for their services to the 3i group and to provide them with performance incentives in their work for the group. During his employment the pursuer became a partner in seven such limited partnerships and invested approximately £350,000 of his own money in those partnerships. The management of the partnerships was carried out by the defenders, who are sued in their capacity as managers of the seven limited partnerships. When an employee leaves the 3i group, he is entitled to retain his investment in the limited partnerships unless he is classified as a “competing leaver” in terms of the partnership agreements; in the latter event the employee is only entitled to a restricted payment for his share in each such limited partnership. When the pursuer left, 3i informed him that he was a competing leaver. The result was that 3i proposed to return him a sum of approximately £90,000, which was the value of his share in the partnerships at the time when he left.

[2] The pursuer has brought the present action to challenge that decision.

He seeks a declarator that he is an ordinary leaver and not a competing leaver in terms of the limited partnership agreements, together with an accounting in respect of the sums that would be due to him under the limited partnership agreements if he were classified as an ordinary leaver. The critical question is accordingly whether the pursuer was a “competing leaver” in terms of the limited partnership agreements. The Lord Ordinary answered that question in the negative, and granted declarator that that he was an ordinary leaver. The defenders have reclaimed against that decision.

Facts

F

[3] The Lord Ordinary made detailed findings of fact, and these have been incorporated by the parties into a joint minute of admissions. The following narrative is based on that joint minute.

The pursuer’s involvement with 3i and the limited partnerships

G

5246.indd 400

[4] The pursuer was employed by 3i between 1989 and 2011. He joined as a trainee investment controller and was steadily promoted to more senior positions. During his employment he acquired experience in both of the types of private equity investment carried out by 3i, growth capital and buyouts. The

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2016 S.C.L.R.

Bishop v 3i Investments plc (IH)

401

distinction between these is that in a growth capital investment the investor provides funds in return for a minority stake in the equity of a company, whereas in a buyout the investor takes a controlling stake in the company.

Until 2005 the pursuer was involved in the completion of many buyouts. His last role as a dealmaker involved investing £32 million in a company called SLR, in 2008. In the same year he became the first head of the global growth capital portfolio at 3i. In 2009 he became a member of the growth leadership team and the growth capital investment committee. One of the witnesses, Mr Kevin Dunn, the general counsel and company secretary of 3i, described the pursuer as “an experienced and influential investor”. He sat on the boards of various companies in which 3i held investments.

[5] Investment companies commonly provide incentives for their employees in a form known as “carried interest”. To receive carried interest, a member of a fund’s management team must become a member of the carried interest partnership and sign a limited partnership agreement. Each individual employee contributes a small percentage of the fund’s initial capital. The participating employees are also usually required to make a further investment, through the limited partnership, in any company in which the funds that they manage makes an investment. When the fund disposes of an investment, it returns a proportion of the amount realized to the investors, including the carried interest partners. In order to retain investment teams, limited partnership agreements specify that an employee’s right to receive carried interest will depend upon the circumstances in which he leaves his employment.

As already narrated, between 2004 and 2011 the pursuer entered into seven limited partnership agreements.

[6] The pursuer tendered his resignation to 3i on 3 May 2011. He joined another company, Business Growth Fund plc (BGF), in June of that year as its head of investments. Prior to his departure from 3i he had meetings with the human resources director and the chief executive. They both told him that he would be classed as a competing leaver and would therefore lose his right to share in profits from his limited partnership agreements. The pursuer was disappointed to receive this information, as a few days previously he had had a discussion with his immediate superior and had understood that he would be entitled to receive his carried interest. The final decision to class the pursuer as a competing leaver was taken by the defenders’ chief executive, but he acted on the advice of Mr Dunn. In evidence, Mr Dunn explained that he had little information about BGF at the time, and that he derived his knowledge of that company from its articles of association and its embryonic website.

A

B

C

D

E

History of 3i

[7] In 1929 the government asked Lord Macmillan to chair a committee to consider how best to promote the development of trade and commerce within the UK. Members of the committee included the economist John Maynard Keynes and the politician, later Foreign Secretary, Ernest Bevin. Its report, published in 1931, identified an absence of funding for small- and mediumsized enterprises (SMEs). This came to be known as the “Macmillan gap”.

Action to provide for such funding was taken in 1945, when the then government established the Industrial and Commercial Finance Corporation (ICFC) to achieve that purpose. ICFC subsequently changed its name to Investors in Industry and latterly it has been known as 3i. Since its inception, 3i has provided finance to a wide range of companies. It has moved away from investing in SMEs, and instead it focuses on providing finance to potentially

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high-growth and quoted companies. It closed its venture capital business, which involved more risky investments, in about 2008. At present it carries out three “business lines”, namely private equity, infrastructure and debt management.

[8] Until 2009, 3i funded its growth capital investments from its own capital assets. Following the 2008 financial crisis, however, it established a growth capital fund to raise funds externally to contribute towards making such investments. All of 3i’s documents relating to that fund state that it will make investments in a range from €25 million to €150 million (a concept known as “banding”). That information is known to investors, companies in which investments are made, staff and shareholders. In the case of investors, it is contained in a document known as the private placement memorandum, which was described in evidence as 3i’s contract with investors. In about March 2010 3i distributed an “eligibility guide” to all of its investment staff, setting out the criteria that they had to apply in making investments; this included the financial banding of €25 million to €150 million. That document was prepared in a format that enables staff to have it easily to hand.

[9] In the last five years 3i has only made one growth capital investment in the UK. It invested £27 million (€32.8 million) in a company known as Go Outdoors in 2011. 3i’s accounts for 2013 state that its strategic priority is to cut down staff and to focus on “harvesting” existing investments. It aims to make five to seven high-level investments each year in the global areas in which it operates. Its goal is to secure a return of approximately 15–20 per cent.

History of BGF

D

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[10] After the financial crisis of 2008 the government wished to stimulate the economy by encouraging entrepreneurs. It was concerned about the lack of funding for SMEs. It accordingly asked Mr Chris Rowlands, a well-known figure in the investment world, to convene a panel to review the position.

Mr Rowlands gave evidence, which the Lord Ordinary described as helpful.

He had worked for many years at 3i; when he retired in March 2009 he was a member of its executive team and its group investment committee, and he was chairman of 3i Asia. Mr Rowlands’ panel published its report, known as the Rowlands Report, in November 2009. It concluded that the market gap for finance for SMEs is “permanent, not just short-term and cyclical, and exacerbated by recession”.

[11] As part of its review, the panel investigated the role of 3i. It considered that 3i had played an important role in attempting to fill the Macmillan gap, but that it had “gradually shifted away from its initial focus on small businesses to the larger and more commercially viable MBOs/MBIs”. In oral evidence, Mr Rowlands stated that the business community had mourned 3i’s departure from the lower end of the market. His panel recommended that the government should intervene to ensure that growth capital was available in the band between £2 million and £10 million. That amounted to government intervention to fill the vacuum left by the departure of 3i from that part of the market. That finding clearly implies that 3i had moved away from that sector of the market by the time of the Rowlands Report.

[12] BGF was launched in May 2011 to provide growth capital funding of between £2 million and £10 million to UK SMEs. It is prevented from taking a controlling interest in any company, and accordingly it does not fund buyouts. Originally BGF invested in companies with a minimum turnover of £10 million, but that has now been lowered to £5 million. By the date of the proof BGF had made 64 investments, all within the specified band. It aims to

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secure a return of approximately 8 per cent. It could provide growth capital funding above £10 million, but only by way of “top-up” finance. It would not provide initial funding above £10 million.

A

Further findings by the Lord Ordinary

[13] In addition to the findings of fact that have been incorporated into the joint minute, the Lord Ordinary made a number of further important findings, largely of an inferential nature. First, he stated that he was satisfied that there had been no actual competition between BGF and 3i. With regard to investments, 3i had only been involved in one UK transaction since the pursuer’s departure. The pursuer had given evidence that, apart from the investments that BGF had made to date, it had also considered hundreds of other potential investments, but 3i had not been interested in any of them.

[14] Secondly, in relation to competition for funds, the Lord Ordinary held that there was no competition because BGF was funded by five clearing banks while 3i was funded by external investors and shareholders. That is a finding that is in our opinion clearly justified on the evidence; BGF was created under government auspices to implement the recommendations of the Rowlands Report, and in that way the cooperation of the clearing banks was achieved.

Thus there is no need for BGF to raise funds on capital markets.

[15] Thirdly, reference had been made in submissions to competition for staff. On this matter the Lord Ordinary concluded that there was no evidence of any competition for staff, because 3i had been shedding rather than recruiting staff. That accords with the evidence narrated at para.9 above. The Lord Ordinary notes that in evidence Mr Rowlands indicated that he thought that 3i had lost hundreds of staff. On the question of staff, the Lord Ordinary stated that he would be slow to hold that the pursuer was a competing leaver because of the outside chance of competition for staff; the contractual provisions under consideration were mainly directed at investments and investors rather than staff.

[16] Fourthly, the Lord Ordinary found that BGF did not operate in the same sector as 3i. He described 3i as “generally a buyout company that operates at the higher value end of buyout transactions, often abroad”. When it had made an investment it provided intense services to the company in which the investment had been taken, with the intention of securing a higher return. That is in our opinion clearly in accordance with the evidence, which disclosed that 3i would become involved in the management of its investments, usually taking seats on the board. By contrast, the Lord Ordinary found, BGF invested in SMEs in the UK; it only took a minority shareholding; and it managed its investments with a light touch. Once again that finding was clearly justified on the evidence.

[17] Fifthly, the Lord Ordinary found that BGF had been set up expressly to address the gap left by 3i’s departure from the lower end of the market.

That is in our opinion an important finding, as it indicates that the genesis of BGF in May 2011, at the same time as the pursuer left employment with the defenders, was to operate in an area of investment that was not covered any longer by 3i. The Lord Ordinary notes that in his evidence Mr Dunn accepted that it was unlikely that the two companies would compete. Mr Dunn added that it was not beyond the bounds of possibility that BGF would be sitting across the table from 3i in considering an investment. The Lord Ordinary, however, expressly stated that he did not accept that rider. Thus it is apparent that the Lord Ordinary rejected a submission that actual competition between 3i and BGF would be likely.

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Terms of the limited partnership agreements

[18] The limited partnership agreements all contain a definition of the expression “competing leaver” in Sched.3, which deals with leaver and new investing partner arrangements. In all but the first (that relating to UK Private Equity 2004–06), the definition, so far as material to the present case, is in the following terms; in that definition “manager” means 3i Investments plc or its successor as manager of the partnership and “associate” means, in general terms, a member of the 3i group: a competing leaver is: “any ordinary leaver . . . who, . . . at the time of or within 24 months of becoming an ordinary leaver: (a) takes or is understood to be intending to take employment in a competitive capacity with, or provides competitive services to, a competitor of the manager or any of its associates; ... and for these purposes (A) without limiting the foregoing, the taking of employment with, or the provision of services to, any business or fund which is deemed to be a competitor pursuant to (B) below (other than where such employment or provision of services is with or to a part of such business not directly or indirectly involved in any relevant operations) shall be deemed for the purposes of (a) above to be taking employment in a competitive capacity or providing competitive services (as the case may be; (B) without limiting the foregoing, any business or fund wherever located in the world shall be deemed to be a competitor if such business . . . or fund operates or is intended to operate or is likely to operate (whether in whole or in part) in any geographical area(s) and investment product sector(s)/business line(s) (taken together) in which the manager or any of its associates operates or, as at the leaving date in respect of such ordinary leaver, is proposing to operate within the next 12 months; and (C) ‘relevant operations’/ ‘operates’/ ‘operate’ shall mean making, dealing in, managing or advising as to unquoted equity investments whether for the relevant business’s own account as principal or as agent, trustee, manager or adviser on behalf of any other person(s).”

[19] The structure of the definition is accordingly that subpara.(a) of the main part of the definition makes use of the general concept of competition, referring to “employment in a competitive capacity” or “competitive services” with a “competitor”. By itself, this would indicate that actual competition must be demonstrated to render an employee a competing leaver. Nevertheless the main part of the definition is supplemented by the further explanation contained in subparas (A) and (B). The latter is a deeming provision to the effect that a business is to be treated as a competitor if it operates or may operate in any geographical area and “investment product sector(s)/business line(s)” in which the defenders operate. Much of the argument focused on the significance of the phrase just quoted. Finally, it should be noted that the definition in the first limited partnership agreement, that relating to UK Private Equity 2004–06, contains a definition that differs in that it does not include the words “/business line(s)” in para.(B). Mr Dunn gave evidence that those words were added to reflect the fact that 3i had begun using that terminology. Before the Lord Ordinary, parties were agreed that the difference

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in wording was not material for present purposes, but the defenders now contend that it was, a matter that we discuss subsequently.

A

Principles of contractual construction

[20] The general principles of contractual construction are well established.

These are stated by Lord Clarke in what is now the leading case, Rainy Sky SA v Kookmin Bank at paras 14 and 20–30, and in Scotland in Grove Investments Ltd v Cape Building Products Ltd at paras 9–11. In summary, the contract must be construed in context and in accordance with the purposes that it is intended to achieve. In the words of Lord Clarke in Rainy Sky: “the ultimate aim of interpreting a provision in a contract, especially a commercial contract, is to determine what the parties meant by the language used, which involves ascertaining what a reasonable person would have understood the parties to have meant. . . . [T]he relevant reasonable person is one who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract” (para.14).

[21] Furthermore, where a contractual provision has two possible meanings, in choosing between them the court should choose the meaning that best accords with commercial common sense. In Rainy Sky Lord Clarke states: “If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other” (para.21).

In accordance with such an approach, it is significant that contracts are entered into by parties for their mutual benefit, to achieve common objectives. For that reason they should be construed in such a way that the benefits enjoyed by each party and the burdens imposed on each party are not excessive or disproportionate: Grove Investments, at para.11.

B

C

D

Lord Ordinary’s decision

[22] On the basis of the findings of fact that have been narrated, particularly those set out at paras 13–17, the Lord Ordinary concluded that the pursuer was not a competing leaver for the purposes of the limited partnership agreements. He adopted a contextual and purposive approach to construction, and stated that the court should adopt the meaning of words that best accords with commercial common sense. On that basis, the purpose of the competing leaver provisions was not to impose a blanket ban on joining competitors, but was to prevent damage to 3i’s business; consequently commercial common sense suggested that an employee should be classified as a competing leaver if he took a position with a rival that might cause such damage. Furthermore, if the definition of “competing leaver” were given an unduly wide construction, as contended for by the defenders, that would produce an excessive or disproportionate burden on the pursuer.

[23] The critical expression in the limited partnership agreements was “investment product sector”. This was not trade jargon or otherwise a term generally used in the investment industry; Mr Rowlands had said that he was not familiar with it, although he knew and understood the individual words.

As to what amounted to a sector, the word might be defined as an area or portion that is distinct from others, but that could relate to the type of economic activity or to banding. The Lord Ordinary thought that there was a clear difference between a company that only offered investments between €25 million and €150 million and another that only operates between £2

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million and £10 million. He considered that the whole thrust of the evidence, including the defenders’ witness, Mr Dunn, was that banding was an important differentiating factor. No investment company operated at all levels of the market, and each published information about its investment strategy. Any change in strategy would necessarily be published. Until that happened, the company had no mandate to go beyond its advertised banding.

[24] On that basis, the Lord Ordinary indicated that he was satisfied that there had been no actual competition between BGF and 3i; the critical finding of fact is that narrated at para.13 above. Nor had there been any deemed competition within the meaning of subpara.(B) of the competing leaver clause.

BGF and 3i operated in sectors that were perceived as different. They operated at different banding levels; much of 3i’s investment was abroad; and the two companies adopted different attitudes to involvement in the management of the companies in which they invested. Furthermore, BGF had been set up to address a perceived gap in 3i’s coverage of the market.

Arguments for defenders

C

D

E

F

[25] The defenders now contend that the Lord Ordinary erred in law in a number of respects. In summary, these are as follows. First, it was appropriate to give a wide meaning to competition in the circumstances of the case. The purpose of the limited partnership agreements was to provide incentives for 3i’s management by sharing profit with them. Consequently a number of parties were interested in ensuring that managers contributed their skills and maximized profit, and remain committed to doing so. Managers who left limited partnerships early left the remaining partners to manage the investments and undertake the work required to bring the investments to a successful conclusion. Secondly, the Lord Ordinary had given insufficient weight to the deeming provision in subpara.(B) of the definition of competing leaver.

[26] Thirdly, the notion of actual competition should be construed broadly; all enterprises engaged in private equity business were capable of competing with each other, for deals, for funds and for staff. The differences in banding did not preclude competition between 3i and BGF for individual deals.

Furthermore, there was no evidence to suggest that BGF was prohibited from providing growth capital funding by way of a contribution to a consortium of enterprises engaged in private equity business. That could mean involvement in deals above £10 million. Fourthly, the Lord Ordinary was said to have misconstrued the provisions relating to deemed competitors. The contractual provision should be construed by reference to the circumstances that existed at the date when each of the contracts was concluded. The limited partnership agreements had been concluded over a period from 2004 to February 2011, but 3i did not limit the financial range of its investments until it established a Growth Capital Fund in March 2010. Thus only the last limited partnership agreement would be subject to the limited financial range of investments.

Fifthly, the expression “investment product sector/business line (taken together)” cannot be given a meaning if its wording is taken literally, but sense can and should be made of it by construing it as a reference to the totality of all of the different parts of 3i’s business at the date of the contract.

Construction of the limited partnership agreements Context and purpose

G

5246.indd 406

[27] The question before the court turns on the construction of the expression “competing leaver” as used in Sched.3 to each of the limited partnership

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agreements. The context in which that definition occurs is that of a limited partnership whose general partner is a subsidiary company of 3i and whose limited partners include external investors and the carried interest partners, who comprise 3i directors and employees such as the pursuer. Participation in the limited partnership enables the employees in question to share in the dividends and capital growth obtained from investments of the 3i group, thus rewarding them for their services and providing them with an incentive to good future performance. The purposes of the agreement as a whole are accordingly providing a vehicle for investment by 3i group and outside investors, and providing a reward and incentive to senior staff.

[28] If one of the employee limited partners leaves 3i’s employment, that may clearly have an adverse impact on the limited partnership, because that employee will no longer be able to take part in the management of the partnership’s investments. Nevertheless, leaving 3i’s employment is not the criterion for denying the employee the right to participate in the growth of the partnership assets; if for example an employee accepted a lectureship in a university, or simply retired, he would be treated as an ordinary leaver. The criterion is rather that of a “competing leaver”, and the definition of that concept indicates in our opinion that competition with 3i is a crucial element. It is the existence of this element of competition with 3i that is the reason for excluding the employee from future growth of the limited partnership.Thus the purpose of the definition is to exclude employees who leave the 3i group and go to work for a competitor with that group.

A

B

C

Deemed competition: “investment product sector” and “business line”

[29] The definition makes use of the concepts of actual competition (in the opening part of the clause) and deemed competition (in subparas (A) and especially (B)). We heard some debate on the reason for including deemed competition. In our view it can be said that there are two reasons. The first is to remove an element of uncertainty from the notion of actual competition.

The second is to reflect the way in which markets operate. Two firms operating in what is clearly the same market (or the same market sector) may never in fact compete on a deal, but the fact that they are in the same market means that they are potential competitors, and the existence of such potential competition has an effect on the whole market. Thus subpara.(B) is aimed at the concept of competition in the manner in which it operates in real markets.

[30] The critical phrase used in subpara.(B) is “investment product sector(s)/business line(s) (taken together)”. It was agreed that the expression “investment product sector” is not a term of art; Mr Rowlands stated that he was not familiar with the expression, although he understood each of the individual words. The Lord Ordinary referred to the general meaning of the words: “sector” meant an area or portion that is distinct from others. We agree that that is an appropriate definition of the word. Its origins lie in the field of geometry, but it has come to denote a division or section, especially as applied to economic operations. The expression “business line” is perhaps more general. In a commercial context the word “line” can be taken to denote trade in or stock comprising a particular product, which may of course include a service such as investment management. On that basis, we do not consider that the expression “business line” adds anything of significance to “investment product sector”. If anything, “line” is the more particular word, indicating a single product rather than a range of products, as would normally be comprised in a “sector”.

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[31] For the defenders it was submitted that the phrase “business line” could be given a clear meaning in relation to 3i’s business. Two items of evidence were cited in support. First, the private placement memorandum for the 3i Growth Capital Fund stated that 3i invests across Europe, Asia and North America “through three dedicated, specialist business lines being growth capital, buyouts and infrastructure”. That, it was submitted, indicated that “business line” was meant to comprise the whole of 3i’s growth capital business, if that is the area in which the employee worked. Thus any form of growth capital investment would be covered. It appears to us, however, that this is to take the use of the expression in the private placement memorandum out of context. In that document it is used to denote the three broad areas in which 3i carried on business. That is a concept internal to 3i. It is not the same as the general notion of a business line used in discussing economic activity in a market. Secondly, counsel referred to Mr Rowlands’ witness statement, which discusses the notion of a “business line” as used within 3i; he stated that it essentially describes the way in which 3i runs its business. Those business lines were buyouts, venture capital (which was closed and sold), infrastructure and growth capital, essentially the categories that are used in the private placement memorandum. As with the latter document, that appears to us to be a specialized, internal meaning, denoting the division of 3i’s activities. The expression “business line” in the limited partnership agreements, by contrast, is used in the context of competition, which inevitably points to the external markets in which the 3i group operates. That is a different context. The expression “business line” is in our opinion flexible, and its meaning is therefore highly dependent on context.

In those circumstances we are of opinion that the internal use of the expression within 3i does not affect the analysis in the last two paragraphs.

D Time at which those expressions are to be assessed

E

F

G

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[32] The next question is determining the time at which the notion of an investment product sector or business line, and the possible existence of competition, is to be assessed. In our opinion this must be the date at which the employee leaves employment with the 3i group. For the defenders it was submitted that each contract must be construed at the time at which it was concluded. Consequently the investment product sector referred to in subpara.

(B) must be the sector in which the manager and its associates, the 3i group, carried on business at that time, and not at the later time when the employee left his employment. In our opinion this construction would be contrary to commercial common sense. The consequence would be that the effect of the restrictions on competing leavers would be a hostage to future events. For example, 3i might change its investment activities in a major way, and an employee might subsequently leave and join a company that was clearly a competitor to 3i’s new activity, in banding and every other respect. If the defenders are correct, the employee would not be a competing leaver, because the relevant activities of the 3i group would have been determined at the earlier date when the limited partnership agreement was concluded. In our opinion the intention of the definition was clearly that issues of competition and the like should be determined at the time when the clause operates, not when the contract is concluded. Anything else would render the clause arbitrary and unpredictable in its effectiveness.

[33] For this reason we would reject an argument presented for the defenders to the effect that 3i did not limit the financial range of its investments until it established the Capital Growth Fund in 2009. It was said that the earlier limited partnership agreements should be construed without any

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reference to the limit adopted in 2009. To do that would in our opinion fundamentally distort the operation of the agreement, in that the existence or otherwise of competition at the time when an employee left would be gauged against the activities of 3i at an earlier date.

A

Banding

[34] The argument for the pursuer rests on the proposition that, in determining whether he has joined a competitor, regard must be had to banding. This refers to the levels at which investment companies make investments. The evidence disclosed that in the private placement memorandum, described as 3i’s contract with investors, and the eligibility guide issued to investment staff in about March 2010, it was indicated that 3i’s Growth Capital Fund would make investments in a range from €25 million to €150 million. In the case of BGF, when it was launched in May 2011 the intention was to provide growth capital funding of between £2 million and £10 million, and BGF could not take a controlling interest in a company and therefore did not fund buyouts. Those financial limits are clearly quite distinct, as the Lord Ordinary held. He further held that the whole thrust of the evidence, including that of Mr Dunn, was the banding was an important differentiating factor among investors; no company operated at all levels of the market, and each published information about its investment strategy, including banding. Interested parties would require that information to assess both risk and return, and any change in strategy would be published.

Those statements by the Lord Ordinary were based on his general findings of fact, which were not challenged. The statements themselves were not challenged to any significant extent. In our opinion they clearly justify the proposition that banding is an important differentiating feature in the investment market.

[35] Perhaps the clearest indication of the importance of banding is found in the Rowlands Report itself. That report identified a gap in the investment market in the band between £2 million and £10 million. Following the Macmillan Report, 3i and its predecessors had provided funding for SMEs in that band, but in later years 3i had moved away from SMEs to provide funding for larger companies. The evidence disclosed the economic advantages of doing this: in summary, making a large investment takes broadly as much work as making a small investment, and the returns should be greater.

Regardless of the reasons, however, 3i’s documents disclosed that it would operate in the financial banding of €25–€150 million. That resulted in the deficiency identified by the Rowlands panel. The existence of that deficiency indicates very clearly in our opinion that the band between £2 million and £10 million is a different market from the band where 3i operates. That was the fundamental reason for the recommendation that gave rise to the creation of BGF. It is accordingly the strongest of evidence that BGF does not operate in the same market as 3i.

[36] No doubt it can be said that the boundaries of a sector defined in terms such as £2–£10 million are not clear. Nevertheless the inability to draw a precise line does not mean that no distinction exists; it is merely an indication that difficult cases may exist in the area of the boundary. On the Lord Ordinary’s findings, this is not such a case. The findings in fact narrated above at paras 8–9, 11–13 and 16–17 clearly justify the conclusion that BGF and 3i operate in different markets. Thus it cannot be said that there is competition, in any significant sense, between 3i and BGF. The foregoing applies both to the existence of competition at a general level and to the concepts of “investment product sector” and “business line” as used in subpara.(B) of the definition of competing leaver.

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Actual competition

[37] The initial part of the definition of competing leaver, in particular subpara. (a), covers employees who leave 3i to join actual competitors. The Lord Ordinary stated that he was satisfied that there had been no actual competition between BGF and 3i. 3i’s investments had only involved one transaction in the UK since the pursuer’s departure; by contrast BGF had made a substantial number of investments in the UK and had considered hundreds of other potential investments. 3i had not been interested in any of these.

[38] For the defenders it was further argued that 3i and BGF competed in obtaining funds and staff. That submission was rejected by the Lord Ordinary, and in our opinion he was correct to do so. So far as funds are concerned, the 3i group raises funds on ordinary financial markets, through shareholders and investors in specific funds, including those held by the limited partnerships.

BGF, by contrast, is funded by five clearing banks. In his witness statement Mr Rowlands indicates that BGF was set up following the report of his panel, and that the company had neither the time nor the confidence to raise growth capital funds merely for the UK as there had not been a great deal of interest in the UK growth capital market, which was considered a relatively risky type of investment. Consequently the funds were raised from clearing banks.

[39] As to staff, the Lord Ordinary found that 3i had been shedding rather than recruiting staff, on a considerable scale. Consequently he rejected the contention that there was any competition in relation to staff; a theoretical possibility existed, but such competition was unlikely. For our part, we are doubtful whether competition in recruiting staff was within the contemplation of the definition of competing leaver. Within the financial services industry certain skills are widely marketable; these include the ability to pick investments, to secure the proper management of companies in which shares are held, and in due course to realize investments. Those are the skills that the pursuer had, together no doubt with the other senior employees of 3i. Throughout the investment industry, however, those skills are self-evidently in demand. If, therefore, competition for staff were relevant to the notion of a competing leaver, it might be said that 3i were in competition with a very large part of the financial services industry, including companies that could not on any rational basis be described as in competition with 3i: for example a life company or investment trust that invested in publicly quoted companies and bonds. In that event there might be a serious question about whether the restrictions in the competing leaver clause were contrary to public policy, but it is unnecessary to take that issue further.

Deemed competition

F

G

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[40] We are equally of opinion that it cannot be said that there was any deemed competition between 3i and BGF. For the reasons already stated we consider that the different banding within which 3i and BGF operate means that it cannot be said that the latter company: “operates or is intended to operate or is likely to operate . . . in any . . . investment product sector(s)/business line(s) (taken together) in which the Manager or any of its Associates operates on . . . is proposing to operate within the next 12 months.”

For this purpose, the Rowlands Report’s identification of a gap in the market in the £2–£10 million band, the failure of 3i in its later years to fill that gap, and the creation of BGF specifically to meet the problem of funding in that area are of fundamental importance.

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[41] A specific argument presented on behalf of the defenders was that BGF could lend outwith the £2–£10 million band by using a range of devices.

They could, for example, participate in a consortium which collectively provided a large amount by way of growth capital. If a company wished to raise more than £10 million it could take £10 million from BGF and the remainder from a bank or other source of finance. Furthermore, BGF could make an investment outside the £2–£10 million range provided that the overall average in its portfolio was not greater than £7.5 million. In any of those events, it was submitted, BGF could find itself in competition with 3i.

We were not, however, referred to any evidence that said transactions actually took place, or even that they had been considered by BGF as a practical possibility. Furthermore the reasons for setting up BGF were to provide funding within a specific banding, to achieve the public purposes that had been identified in the Rowlands Report. Against that background, we consider that it should not be presumed, without actual evidence, that BGF would disregard or circumvent the very reasons for its existence.

[42] Counsel for the defenders submitted that the concepts of actual and deemed competition found in the definition of a competing leaver in the limited partnership agreements should be given a wide construction. A wide definition would discourage members of a limited partnership from going off to find other work. That was in the partnership’s interests, because if one partner left the work required to be done by those remaining and the partnership would have lost the expertise of the departing partner. It was also encouraging for investors to have the prospect of continuity. That is no doubt true so far as it goes. Nevertheless, as we have already observed, it is not in every case where an employee/limited partner leaves the partnership that the competing leaver provisions will come into operation. Those provisions rely on the concept of competition. Competition is a well understood economic concept. Enterprises are in competition if they look for business within the same market, the market in large measure being defined by the concept of cross-elasticity of demand. That in our opinion was the concept of competition that is contemplated by the competing leaver provisions. Whether 3i and any other company, including BGF, operate in the same market is a question of fact. We can see no advantage in seeking to give the concept of competition a larger scope than it would normally bear.

[43] Yet a further submission for the defenders was that the Lord Ordinary had construed the limited partnership agreements as if they were restrictive covenants in a contract of employment between the pursuer and the defenders; he had failed to have regard to the fact that seven limited partnerships were involved, in each of which several 3i employees were partners. On that basis it was submitted that the notion of an excessive or disproportionate burden on the pursuer was irrelevant. We cannot agree with this submission. The Lord Ordinary plainly construed the limited partnership agreements as they were.

The notion of an excessive or disproportionate burden, used in Grove Investments, is of general application to commercial contracts. The fundamental point is that a contract is a cooperative enterprise intended to provide mutual benefits. For that reason a contract should be construed in such a way that the benefits that may objectively be expected from the contract accrue to both parties and, correspondingly, that one party is not subjected to an excessive or disproportionate burden.

[44] Finally, the defenders placed some reliance on the decision of Lord Glennie in Greck v Henderson Asia Pacific Equity Partners (FP) LP, where it was concluded that a provision similar to the dealing provisions in the present

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Bishop v 3i Investments plc (IH)

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limited partnership agreements had been included to avoid the uncertainty of knowing whether the business that the employee was joining was or was not a competitor. The clause in that case was construed in such a way that the pursuer, the employee, was held to be a “bad leaver”, the equivalent of a competing leaver in the present case. Nevertheless, that clause was in different terms from the present clause. It provided that a leaver should be deemed to have joined a competitor if the competitor’s business included making, dealing in, managing or advising as to unquoted equity investments whether for its own account or otherwise. That definition was accordingly focused on specific and widely drafted investment activities; the present clause, by contrast, relies on notions of actual and deemed competition by reference to the activities of 3i. That appears to us to be a fundamental difference.

Conclusion

C

[45] For the foregoing reasons we are of opinion that the Lord Ordinary reached the correct conclusion for the correct reasons. We will accordingly refuse the reclaiming motion and remit to the Lord Ordinary to proceed as accords; the quantification of the pursuer’s claim remains in issue.

For the pursuer and respondent: Clark QC, Richardson, instructed by Pinsent Masons, Solicitors, Edinburgh.

For the defenders and reclaimers: Napier QC, Hardman, instructed by Maclay Murray and Spens LLP, Solicitors, Edinburgh.

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A SHERIFF COURT—Edinburgh

10 June 2016

Sheriff Lindsay D R Foulis STEPHEN GREEN CAROL GREEN

Pursuers B

against JOHN ALEXANDER HUSBAND CHALMERS THOMAS WYLLIE CHALMERS IAIN ALEXANDER CHALMERS as the partners of the firm J A H CHALMERS and as individuals

Defenders

Harassment—Joint application by pursuers—Farming activities— Whether activities aimed at individual—Whether activities harassment—Whether joint application competent—Whether activities “course of conduct”—Damages – Prevention of Harassment Act 1997 (c.40), s.8 Section 8 of the Protection from Harassment Act 1997 provides, inter alia: “(1) Every individual has a right to be free from harassment and, accordingly, a person must not pursue a course of conduct which amounts to harassment of another, and— (a) is intended to amount to harassment of that person; or (b) occurs in circumstances where it would appear to a reasonable person that it would amount to harassment of that person.

(2) An actual or apprehended breach of subsection (1) may be the subject of a claim in civil proceedings by the person who is or may be the victim of the course of conduct in question; and any such claim shall be known as an action of harassment.

(3) For the purposes of this section— ‘conduct’ includes speech; ‘harassment’ of a person, includes causing the person alarm or distress; and the course of conduct must involve conduct on at least two occasions.

(4), it shall be a defence to any action of harassment to show that the course of conduct complained of— ... (c) was in the particular circumstances, reasonable.

(5) In an action of harassment, the court may, without prejudice to any other remedies which it may grant— (a) award damages; (b) grant— (i) interdict or interim interdict; (ii) if it is satisfied that it is appropriate for it to do so in order to protect person from further harassment, an order, to be known as a ‘non-harassment order’, requiring the defender to refrain from such conduct in relation to the pursuer as may be

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2016 S.C.L.R.

specified in the order for such period (which includes an indeterminate period) as may be so specified, but a person may not be subjected to the same prohibitions in an interdict or interim interdict and a non-harassment order at the same time.

(6) The damages which may be awarded in an action of harassment include damages for any anxiety caused by the harassment and any financial loss resulting from it. . . .�

The pursuers purchased a farmhouse known as Gourdihill Farmhouse near Bankfoot in September 2001. The subjects had been part of larger subjects, namely Gourdihill Farm. It had been vacant for some time prior to their purchase of the subjects and they were told that the farm was to continue to be a working farm. The remainder of the farm had been purchased in early 2001 by the first defender and part of the farm consisted of a farm steading consisting of a large shed and an outbuilding which was situated next to the farmhouse. Each of the defenders was involved in the day-to-day activities of the farm. The pursuers developed their property with an extension and erected a boundary wall and fence.They also planted a mixed hawthorn and blackthorn hedge about three feet within the boundary between their property and the steading. Their planning permission required them to maintain the hedge without gaps. In October 2008 the first pursuer began to work abroad for about ten weeks at a time, returning home for three weeks.

Until about 2009 relations between the parties were neighbourly but in late 2009 both subjects experienced a serious rat infestation and steps had to be taken by the second pursuer to contact a vermin eradication business to deal with the problem. Although the defenders cooperated they did not treat the problem as seriously as the pursuers did. The pursuers considered that the problem was caused by careless storage of grain at the steading.They attempted to buy the steading so that they could improve the amenity of their property, but their offer was rejected.

The pursuers began to consider that the defenders were deliberately harassing them and complained about a number of activities of the defenders, including the lighting of fires making unpleasant smells, careless storing of grain encouraging rats, the use of rat poison and herbicides causing damage to their hedge and the deliberate deposit of rat poison where the pursuers’ dogs would be. They made complaints to the police and to Trading Standards. As a result, the defenders became annoyed with them and began to carry out activities which they thought would upset and annoy the pursuers. These included placing of large agricultural vehicles close to the boundary in the line of sight of the windows of the pursuers’ house, placing opened silage bales which they knew would create a smell close to the boundary and leaving a cart containing manure next to the boundary. They also damaged the hedge belonging to the pursuers with herbicide.

The pursuers argued that these and other activities amounted to harassment and craved the court to grant a non-harassment order or interdicts and damages. The defenders argued that the activities were normal agricultural activities and were not harassment.

The court raised the question of the competency of the action since it had been raised by joint pursuers and there was no specification in the averments of the individuals said to be harassed. The averments, and the evidence led based on the averments, did not satisfy the statutory requirements for a non-harassment order. The issues which had to be solved were: (1) what incidents occurred which might be the responsibility of the defenders; (2) whether any of these incidents were the responsibility of the defenders, as opposed to simply the actions of the individual who actually carried them out; (3) whether the actions for which the defenders were responsible amounted to harassment as defined in terms of s.8 of the Protection from Harassment Act 1997; and (4) whether a non-harassment order should be

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granted and if so in what terms, and, in the event of harassment being established, the consequences for the second defender and if appropriate, the amount of suitable compensation.

The solicitor for the pursuers argued that the position for the pursuers was that both the pursuers were targeted as individuals by the defenders. They were joint proprietors of the subjects the defenders’ actions were directed against them as such. Any issue of relevancy had been superseded by the fact that a proof rather than a proof before answer had been allowed. In relation to damages it was possible for an individual to claim damages where the target of the misconduct was another person, but it was foreseeable that the conduct would have direct effect on the claimant.

Held (1) that the issues of relevancy were superseded (p.427); (2) that the incidents relating to rats, farm operations between mid August and the start of October 2010 and the burning of bonfires, were not harassment (p.427); (3) that there were a number of incidents, that in relation to the septic tank and relating to rat poison and the pursuers’ dogs which did amount to harassment (p.428), but an order for interdict or a non-harassment order could not competently be granted in favour of the pursuers in the instant action of harassment founded upon the statutory provisions and the legislation prohibited harassment of an individual and provided such a person alleging such harassment with various remedies including interdict and a non-harassment order which remedies were personal to that individual and there required to be separate orders sought in the name of each pursuer as opposed to what were in effect joint orders (p.430); (4) that in any event, the orders sought were too imprecise; (p.430); and (5) that the second pursuer was entitled to compensation and awards of solution in the sum of £3,000 and £265.99 should be made (pp.432–433) and orders sought by the pursuers refused.

A

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D

Cases referred to: Dickie v Flexicon (Glenrothes) Ltd, Sheriff Braid, Kirkcaldy Sheriff Court, 4 September 2009, unreported Iqbal v Dean Manson Solicitors [2011] EWCA Civ 123; 2011 I.R.L.R. 428 Jones v Ruth, [2011] EWCA Civ 804; 2012 1 W.L.R. 1495; [2012] 1 All E.R. 490 Kennedy v Cordia (Services) LLP [2016] UKSC 6; (S.C.) 2016 S.C.L.R. 203; 2016 S.L.T. 209 Levi v Bates [2015] EWCA Civ 206; [2016] Q.B. 91; 2015 3 W.L.R. 769; [2016] 1 All E.R. 625 Louden v Chief Constable of Police Scotland, 2014 S.L.T. (Sh Ct) 97 Maitland v Bingorama Ltd, 1977 S.L.T. (Sh Ct) 58 Majrowski v Guy’s and St Thomas’s NHS Trust [2006] UKHL 34; 2001 1 A.C. 224; [2006] 3 W.L.R. 125; [2006] 4 All E.R. 395 Marinello v City of Edinburgh Council [2011] CSIH 33; (I.H.) 2011 S.C.L.R. 473; 2011 S.C. 736; 2011 S.L.T. 615 Newcastle Building Society v White, 1987 S.L.T. (Sh Ct) 81 O’Connor v McRobb, 1975 S.L.T. (Sh Ct) 42 Quinn v Monklands District Council, (Sh Ct) 1995 S.C.L.R. 393 Thomas v News Group Newspapers Ltd [2001] EWCA Civ 1233 Vento v Chief Constable of West Yorkshire [2002] EWCA Civ 1871 Ward v Scotrail Railways Ltd, 1999 S.C. 255.

The full circumstances of the case and the arguments of counsel are to be found in the following judgment of the sheriff which was issued on 10 June 2016.

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Green v Chalmers (Sh Ct)

2016 S.C.L.R.

SHERIFF FOULIS Proof in this action in which the pursuers seek interdict and a non-harassment order took place on 7,, 8, 10, and 11 September and 2, 3, 5, and 6 November 2015. In addition, the second-named pursuer seeks damages for harassment.

All remedies are founded upon the provisions of the Protection from Harassment Act 1997.The pursuers were represented by Mr Lafferty, solicitor, Blairgowrie, the defenders by Mr Morris, solicitor, Perth. The pursuers gave evidence and led evidence from Messrs Mark Ballingall and Stephen Melville.

Whilst Mr Ballingall gave parole evidence, an affidavit from the witness was also lodged to constitute his examination in chief. The defenders gave evidence and led evidence from Ms Caroline Chalmers, Ms Angela Scott, and Mr Alexander Spearman. The parties produced two joint minutes of admissions. In terms of one of these documents, it was agreed that the statement from Marjorie Grant, No 6/3/1 of Process, was accurate and admitted in evidence in lieu of parole evidence from that witness. On the conclusion of the evidence, the parties prepared written submissions which are appended to this note. I then heard parties on these submissions on 27 January 2016. On that date the parties expanded their submissions in response to each other’s observations and certain matters upon which I sought clarification. The pursuers further moved to amend their craves. In terms of that verbal motion the pursuers sought to insert “and north-western” before “boundary” in line four of craves 2(vii) and 3(ix). They further sought to alter craves 2(v) and 3(vi) to “by unwrapping and storing exposed silage, dung, or other noxious material at or close to the pursuers’ north western and south western boundaries”. This was opposed by the defenders. I decided to consider this motion to amend whilst the action was at avizandum. I have detailed the further submissions relating to the action itself after the appendix containing the parties’ written submissions. After consideration of an issue to which I refer in the body of this note, I brought the case out for further submissions from the parties. The pursuers provided me with further submissions in writing and after hearing additional oral submissions from the parties on 5 May 2016, I resumed consideration of the dispute.

A quick perusal of the submissions made on behalf of the parties makes it clear that the initial issues to resolve are firstly, what incidents occurred which might be the responsibility of the defenders. Thereafter, it is necessary to determine whether all or any of these incidents are the responsibility of the defenders as opposed to simply the actions of the person who actually carried them out. Thereafter, I shall require to determine whether any actions for which the defenders are responsible amount to harassment as defined in terms of s.8 of the Protection from Harassment Act 1997. I shall then require to consider if interdict or a non-harassment order should be granted and if so in what the terms. Finally, in the event of harassment being established, I shall consider the consequences for the second defender and, if appropriate, determine suitable compensation. In dealing with each of these issues I do not intend to rehearse the evidence from the various witnesses. Rather I shall highlight the evidence which I consider significant in reaching my considerations at the appropriate point.

Before I turn to the issues referred to in the preceding paragraph, I shall deal with the credibility and reliability of the parties. In general, I preferred the evidence from the pursuers. This evidence largely comes from the second pursuer as her husband was absent from home over a significant period during which the events complained of were taking place. The defenders did not dispute that the majority of these events actually took place. There were one

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or two exceptions, the second poisoning of the pursuers’ dogs and the later spraying of the hedge and plants on the pursuers’ subjects, for example. I shall deal with these in the succeeding paragraphs. Ultimately, the crucial issue is whether any actions, so established, constitute harassment in terms of s.8 of the Protection from Harassment Act 1997. That will also be addressed later in this note.

The impression I gained from the defenders was that they were dismissive of the pursuers. They could not see what the fuss was about. The first defender described some of the matters as laughable. His younger son, Iain, the third defender, was less than straightforward in answering questions put in crossexamination. For example, it was suggested to him that he had used a knapsack sprayer in August 2013. Rather than reply unequivocally one way or the other, he commented that it was his name referred to in No 5/1/1 of Process but it might be another person. Again, when asked whether he was on site on 28 July 2010 he said he may have been and said that the spreadsheet would tell whether he was. When it was suggested that he was part of a team, he posed the question, “Am I?” The second defender at times became annoyed during cross-examination. At times he avoided answering a straightforward question.

For example, when asked if a bale had an unpleasant smell if unwrapped for four days, he responded that he did not believe it had been left for that period.

On other occasions he was flippant. For example, when presented with the photograph No 5/2/6e, he commented that the machinery may have been parked there for a brief second whilst the photograph was taken. He displayed a lack of concern for the pursuers at times. Some of his answers verged on the ludicrous. He suggested that the pursuers may have sprayed their hedge and then employed the expert witness to confirm that it had been sprayed. He suggested that the pursuers had an agenda to shut the defenders down. They were making up their accusations. This, however, was not put to the pursuers.

There was no evidence to support this assertion. Again, he suggested a board had been blown over or knocked down on top of the lid of the pursuers’ sceptic tank. He also suggested that when the pursuers referred to silage, it actually was haylage which, he said, was far less likely to produce an unpleasant smell. There was no record for this explanation and it was not put to any witness led by the pursuers. In addition, his evidence did not accord with a production, No 6/2/1 of Process. He had commented that between 1,000 and 1,200 bales of silage were stored on the Gourdiehill Farm Steading. However the production indicated that between 400 and 700 bales were stored on site.

Finally, I cannot leave these general observations without commenting upon the defenders’ position that the pursuers’ sceptic tank had not been emptied.

This clearly is unfounded in the light of the production 5/2/4e of Process.

Turning to the events which are relied upon by the pursuers to establish their claim that the defenders have harassed them, the spreadsheet, No 5/1/1 of Process, details these. This was compiled from extracts of the second defender’s diary, No 5/2/8 of Process. The defenders’ position largely is that they are unaware of the significance of any of the events which are the subject of complaint because the pursuers never raised these matters with them. The defenders, however, do not dispute that the majority of these did take place.

These relate to the rat infestation, the first incidence of the pursuers’ dogs being poisoned, the damage to the hedge in 2010, the sceptic tank incident, the placing and use of farm equipment, the placing and opening of silage, and the bogey filled with dung. The ultimate question, of course, is what can be drawn from the events which are established as taking place? Do they constitute a course of conduct amounting to harassment? The other events of which the

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defenders are unaware relate in the main to the complaints regarding bonfires.

I am prepared to accept that there were bonfires as recorded. I have little difficulty in accepting that most of the events which the pursuers have highlighted did take place. I do not consider that the pursuers would have taken such steps to record matters if they did not, as a matter of fact, occur.

In addition, the pursuers produced photographic evidence of what they found objectionable. The date on which these photographs were taken is the subject of agreement. I have no difficulty in accepted what is said to be depicted in the photographs. This again was not disputed. I further found the pursuers credible and reliable in relation to these events. Their evidence was straightforward and supported by the spreadsheet and photographs. They largely were not challenged as to whether these events took place. Rather the challenge was directed at the inferences to be drawn from such events. That is matter for later consideration.

There are, however, two matters which are disputed. The first relates to the second poisoning of the pursuers’ dogs. The other relates to subsequent damage to the hedge after the initial complaint in June 2010. I shall deal with each in turn.

I accept that the pursuers’ dogs were in fact poisoned as a result of consuming rat poison in July 2010. Were the defenders responsible? The rat problem was under control by July 2010. The rat runs on the pursuers’ property had been to the south of the house. There were several hundred pieces of bait used on the Gourdiehill Farm Steading. The bait recovered from the location where the pursuers’ dogs were poisoned was similar to that which had been used by Go Pest. Rats are nocturnal and are not above ground during the day. Rats can remove poison from their burrows. Being nocturnal, this will logically be evident in the morning. The second pursuer found the bait in the early evening. It had not been there in the morning. The bait was near the boundary between the properties. It was in the spot where the pursuers’ dogs lay. The bait was described as very fresh. The only persons who might realistically have access to such bait were the parties to the action. The pursuers are hardly likely to have left rat poison in a location where it might be consumed by their dogs. Their dogs had been accidentally poisoned before and had required veterinary intervention. The inevitable conclusion is that the defenders are responsible for placing the bait in such a place that the pursuers’ dogs consumed it and were poisoned. This conclusion is bolstered by my decision regarding the spraying of the hedge and saplings to which I now turn.

Damage was sustained to the hedge in 2010, 2011 and 2012. There was also damage sustained to the pursuers’ pot plants in the summer of 2010. The defenders accept responsibility for the spraying of the hedge earlier in 2010.

The more significant matters are the allegations of spraying in the succeeding years and the damage to the pot plants in the summer of 2010. In relation to these incidents, I am likewise satisfied that responsibility rests with the defenders.

Dealing firstly with the pot plants in August 2010 the statement from Marjorie Grant, No 6/3/1 of Process, was agreed by the parties as the equivalent of her parole evidence. Indeed, Mr Morris founded on this statement in relation to other matters in his written submissions. This statement recorded that the plants were either dead or in poor health. Ms Grant was of the opinion that they had been recently sprayed by a chemical resulting in their demise.

The location of the plants on the pursuers’ property pointed to the possible use of a portable spraying device operated by someone leaning over the boundary. A similar operation would leave bait on the pursuers’ subjects in a

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similar area. The defenders had access to and had previously used pesticide/ herbicide sprays. Who else realistically would be responsible? There was no evidence that other persons were at Gourdiehill Farm Steading with issues with the pursuers. The casual labour or contractors could be presumed to act in accordance with the instructions given by the defenders.

Turning to the incident in 2012, Mr Morris in his submission was critical of Mr Ballingall. However, the witness has considerable experience and has given expert evidence in litigation in the past. In my view his evidence was very persuasive. I considered that it was perfectly logical. There was no contrary opinion provided by another witness. Mr Ballingall discounted the likelihood of drift being the cause of the damage. His reasons for doing so were perfectly satisfactory. There was no evidence of the possible operation of drift. The defenders’ position was simply that there had been no spraying at all at the relevant times in 2011 and 2012.

Mr Morris made criticisms of the evidence from Mr Ballingall. He was unaware of the involvement of Ms Grant and her colleagues in 2010 and had not seen their report. This was put to him. However, he was not then asked if it caused him to alter his opinion. He was not challenged in light of anything in that report. Again, he may not have contacted the defenders as it was not in his remit, but it was not put to him that the defenders’ position was that they had not sprayed. He was not asked whether this caused him to alter his opinion. As it is, the defenders’ denial of use of any herbicide flies in the face of his opinion that there had been deliberate spraying of the hedge and saplings. Once again, who else would be responsible? The defenders have access to and had previously applied the necessary chemicals. Standing Mr Ballingall’s evidence regarding 2012, I am prepared to accept that the same thing occurred in 2011. Mr Morris did make reference to the evidence from Ms Angela Scott. She attended Gourdiehill Farm Steading in August 2012. She saw the hedge. She wrote a letter in which it was suggested that the hedge was not well maintained. There are a number of observations to make in this regard. Firstly, if the hedge has been adversely affected by herbicide, it has indeed not been well maintained. Further, who expressed the opinion as to the condition of the hedge? If it was the first defender’s opinion, this is of little value. If it was Ms Scott’s opinion, what expertise does she have to come to such a conclusion? Mr Morris suggested that the first defender would not have asked her to attend if the defenders were responsible. I do not place any weight upon that observation in light of the evidence that points the other way.

The next issue is whether the defenders are collectively responsible for the actions complained of? At para.41in the defenders’ submissions, various observations are made as to the pursuers’ written case. This issue is again visited in paras 209–214. I have some difficulty with the thrust of these submissions in relation to this point. The action is one raised against the partnership of J A H Chalmers and the partners of that concern in their capacity as partners. The action is not directed against the three defenders as individuals. Perusal of para.4.94 of Macphail, Sheriff Court Practice (3rd edn) shows that that designation in the instance clearly indicates that the defenders are the partnership and the partners of that business concern. The pursuers’ submissions, as I read them, are prepared on that basis. The only basis of liability is that the actions, or any of them complained of, are actions of the partnership through the hands of their partners, albeit the specific partner is rarely identified in averment or indeed evidence. The defenders’ submissions in the paragraphs to which I have referred seem to be based on the premise that the pursuers are suing the partnership and

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2016 S.C.L.R.

the partners in that capacity and also the first three defenders as individuals. I do not read the pursuers case in that way. It could be commented that the pursuers have pled their case somewhat inelegantly but these are pleading points in my opinion. They were not covered in the defenders’ rule 22 notes. If the defenders wished specification or clarification, they could have raised this issue in either of these notes. Further, procedurally the parties are past the point when such points have any substance. The interlocutor (in fact there are two!) of 11 March 2015 assigns a diet of proof. Whilst the defenders’ preliminary plea is not explicitly repelled, the terms of the interlocutor implies the defenders were no longer insisting upon their preliminary plea. Finally, there was no objection taken to evidence led.

My reading of the pursuers’ case is that they are basing their claim upon the contention that the defenders are acting together as partners of the partnership.

The partnership through the hands of its partners engaged in the harassment of the pursuers. The various actions complained of were part of a course of conduct by the partnership amounting to harassment. It is the partnership and the partners acting in that capacity against whom the pursuers seek the various remedies. The pursuers still require to prove that all the actions of which they complain are actions for which the defenders are collectively responsible.

Ultimately I have little difficulty in concluding for a number of reasons that the defenders are collectively responsible for the foregoing events. They are the actions of the three defenders acting in their capacity as partners of J A H Chalmers. Firstly, at no point in their averments do the defenders state that the events complained of were the responsibility of one of their number acting independently. Similarly, in evidence, at no point did any of the defenders contend that to be the case. The defenders attended the mediation meeting and presented a united front. The first defender said in evidence that after that mediation meeting he rarely attended the Gourdiehill Farm Steading and was simply told what was happening. He did not dissociate himself from what was going on. The second defender consistently in his evidence made comments which clearly supported the contention that the defenders were acting as one.

When the third defender sealed the sceptic tank, he discussed his actions with the second defender. In addition, there was no real evidence that others were at Gourdiehill Farm Steading. The second defender said that there were not really others there. Early in his evidence he commented that one person was employed casually in the spring. Contractors were used for other odd jobs. It is simply inconceivable that anyone other than the defenders were responsible for the actions complained of and, in light of the evidence, that one of the defenders was acting “ultra vires”.

To conclude this section I would simply observe that if the pursuers in their designation of the defenders are endeavouring to ride two horses with the action potentially being directed against the defenders as three separate individuals but not partners, then their averments virtually exclusively claim that each action was the work of the defenders, not any specific one. They accordingly would have to prove that all three defenders were responsible for each action complained of. The evidence simply would not support this contention. The pursuers can only succeed by establishing that the defenders as a partnership and the partners of that business were responsible for engaging in a course of conduct which amounted to harassment with the various actions complained of forming part of that course of conduct.

The pursuers’ case is based on alleged harassment on the part of the defenders in terms of s.8 of the Protection from Harassment Act 1997. They

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require to establish that the actions cumulatively amount to harassment in terms of the legislation. Each action cannot necessarily be looked at in isolation. Actions, which if looked at in isolation might not be considered as constituting harassment, may, when considered with others, do so. I refer to the opinion of the court delivered by Lord Hardie in Marinello v City of Edinburgh Council, para.11 in which his Lordship adopted the reasoning of Rix LJ in Iqbal v Dean Manson Solicitors: “The act is concerned with courses of conduct which amount to harassment, rather than with individual instances of harassment . . . it is the course of conduct which has to have the quality of amounting to harassment, rather than individual instances of conduct.� Lord Hardie also agreed with the Lord Ordinary’s conclusion that the behaviour complained of could properly be said to be fairly severe or oppressive and unacceptable thus causing alarm or distress amounting to harassment. In Dickie v Flexicon (Glenrothes) Ltd, Sheriff Braid further observed that it is the quality of the whole course of conduct which must be capable of being deemed oppressive and unreasonable. However, as a course of conduct is no more than a series of incidents, it is necessary to consider the incidents separately to ascertain whether . . . it forms a part of a course of conduct amounting to harassment. With that in mind, it would be useful to consider the relevant statutory provisions.

Section 8 of the Protection from Harassment Act 1997 is in the following terms: [The sheriff quoted the section as set out above and continued:] In considering these provisions, I agree with Sheriff Braid in Dickie that s.8(1) lays down a two-stage test. Firstly, the claimant must establish that the course of conduct amounts to harassment. Thereafter, the claimant must establish that the course of conduct concerned was intended to amount to harassment or it would so appear to a reasonable person. In terms of s.8(2) an action of harassment may be raised by the victim of the course of conduct in question. In Marinello Lord Hardie observed at para.8 that to satisfy the legal requirements of [the] section three questions require to be answered in the affirmative. Firstly, was there a course of conduct? Secondly, did that course of conduct amount to harassment of the pursuer? Finally, was the conduct intended to amount to harassment of the pursuer or did it occur in circumstances in which a reasonable person would consider it to be harassment of the pursuer? Sheriff Braid in Dickie v Flexicon (Glenrothes) Ltd very helpfully laid out the principles regarding an action such as the present as follows:

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(a) To qualify as actionable harassment, conduct must be oppressive and unacceptable (the gravity test); (b) The conduct must, viewed objectively, be calculated to cause alarm or distress, whether or not alarm or distress is in fact caused (the objectivity test); (c) The conduct must be targeted at an individual. (d) The conduct need not be such as to constitute a breach of the peace.

F

Against that legislative background and the observations in Dickie, I shall firstly concentrate on the third principle, namely that the conduct complained of must be targeted at an individual. Linked with this is the requirement that the conduct requires to be intended to amount to harassment of that individual or it would appear to a reasonable person that it would amount to harassment of that individual. This follows the approach in England. Lord Phillips in Thomas v News Group Newspapers Ltd at para.30 refers to harassment being conduct which targets an individual and is calculated to have certain

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consequences. In Jones v Ruth at para.24 Patten LJ refers to harassment amounting to the persistent tormenting or irritation of the victim. It is deliberate conduct which the perpetrator knows or ought to be aware has this effect on the complainant.

There accordingly is no doubt that the remedy sought in an action of harassment is specific to an individual. Section 8(2) refers to the person who is the victim of the conduct. Section 8(1) refers to “Every individual” and “harassment of that person”. It is also worthy to note that s.1(1A) of the 1997 Act which applies to England specifically prohibits a course of conduct involving harassment of two or more persons whilst s.1(1) simply prohibits a course of conduct amounting to harassment of another. The former subsection was inserted by the Serious Organised Crime and Police Act 2005.

Applying these principles to the present case, the pursuers may potentially face certain difficulties. Firstly, when regard is had to their averments and matters with which the pursuers have complaint, reference is constantly made to “the pursuers” as opposed to either the first or second pursuer as an individual. Indeed, in condescendence 3 reference is even made on p.7 of the amended record, No 30 of Process, to “the situation adversely affecting the pursuers and their children”. Reference is then made to the defenders beginning a prolonged series of exaggerated farming activities and other provocative and intimidatory action which combined amount to a campaign of harassment. Reference is then made to damage to the hedge and plants, movement of machinery, loss of visual amenity, visual intimidation, poor husbandry, loss of amenity in March/April 2013, loss of visual amenity in April–June 2013, deliberate creation of odour and vermin problem in February and June 2014. Some or all of these acts may amount to harassment but that only satisfies the first part of the two-part test to which Sheriff Braid refers in Dickie. There is no averment specifying which individual is targeted by this conduct. There is no averment as to which individual towards whom the conduct was intended to amount to harassment or could reasonably be concluded to amount to such. The averments in condescendences 4, 5 and 6 take a similar form and are similarly deficient. Condescendence 7 is open to the same criticism. Whilst the second pursuer is averred to have worked on the hedge, as I have found in a finding in fact, the pursuers, however, aver that the hedge was planted by them. The same problems arise. On turning to condescendence 8, apart from a specific averment regarding 7 July 2013, the same issues arise. Condescendence 9 refers to silage but again the same criticism can be made. Condescendence 10 avers that after early 2010 the defenders embarked on a pattern of behaviour which constituted harassment contrary to the 1997 Act and as a result the pursuers seek certain remedies.

However, there has been no reference to the individual targeted by the pattern of behaviour. A reference is made to the second pursuer obtaining medical attention in August 2010 which relates to “her dogs” being poisoned. No previous averments relate to this incident. In condescendence 3 reference is made to a dog-poisoning incident but that relates to 2009. The dogs in that condescendence are referred to as being the pursuers’ dogs. In condescendence 10 the second pursuer is averred to seek damages for losses arising from the “defenders’ misconduct” not harassment. In that article it is averred that the first pursuer regularly works away from home and when he is away the defenders’ conduct escalates. These averments beg the question, if there has been harassment, against whom was it targeted? Does the conduct complained of occur when the first pursuer is present or absent? If the latter, can the first pursuer be the target of such conduct? What was the nature of that harassment

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and when did it occur? Reference is then made to a contractor urinating.

Is that behaviour aimed at the first or second pursuer or their daughter? Is it relevant at all to what has to be established? The pursuers then aver that the operations on Gourdiehill Farm Steading are a deliberate attempt to harass them by the defenders or a reasonable person would so conclude.

Again, however, the same questions arise? Towards whom were the various matters complained of targeted? Towards whom was it intended to amount to harassment or could be so reasonably concluded? These matters are of importance. Following Sheriff Braid in Dickie, any particular incident neither targeted at the claimant nor calculated to cause alarm or distress to that person does not form part of the course of conduct constituting harassment of that person. To expand upon this a little, actionable harassment requires a course of conduct which is either intended to amount to harassment of the individual or is reasonable to so conclude. Accordingly, every instance of the conduct complained of requires to be performed with the intention of amounting to harassment of the person concerned or is reasonable to so conclude. If the event does not satisfy that “intention or the reasonable conclusion” test, it does not form part of the course of conduct necessary to establish actionable harassment against that particular individual in terms of the legislation. That could result in there being no course established, the events prima facie amounting to harassment being reduced to no more than a single event. It could also result in an action for damages being time barred if a subsequent event does not satisfy the “intention or reasonable conclusion” test and the earlier events in the alleged course of conduct occurred more than three years before the action was raised. This was the issue in Marinello. It should also not be overlooked that this action was raised in March 2014. Some of the events complained of occurred in 2009 and 2010. Accordingly, unless they form part of a course of conduct against a particular individual which concluded within three years of the raising of this action, they are time barred. If I cannot find it established which individual was the intended target of the “complained of” behaviour, this causes problems.

I fully appreciate that I gave little weight to certain criticisms from Mr Morris in his submissions but consideration of the pursuers’ averments in light of this particular issue does give the impression, sadly, that a “kitchen sink approach” has been adopted, hoping that something may stick. I, likewise, appreciate that a proof has taken place and accordingly matters are arguably past the stage of the analysis of averments undertaken at a debate. Further, there has been no reservation of a preliminary plea until the conclusion of a proof before answer. The unfortunate consequence for the pursuers, however, is that the problems identified in the pleadings have resulted in the same problems being present when evidence has been led. The pursuers’ evidence failed to focus on the necessity of proving that an individual was intentionally targeted by conduct which amounted to harassment or such a conclusion was a reasonable one to reach. If until the beginning of 2013, the first pursuer was only at home approximately 12 weeks in the year and was absent for the five months after June 2013, it is difficult for the pursuers to establish that he was being targeted by any behaviour by the defenders. There was no attempt to link any specific behaviour to him. If the first pursuer is away from home, could any behaviour really be targeted at him? This matter is highlighted by a passage in the second pursuer’s evidence. She observed that up until the sceptic tank incident she thought all the actions were directed at her. Matters did not seem as bad when the first pursuer was home. This problem arises again when considering the issue of the smell emanating from the unwrapped

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silage in April 2013, shortly after the incident regarding the sceptic tank. Was the silage problem retaliation based on the defenders’ belief that the pursuers’ sceptic tank was the source of any unpleasant smell? The first pursuer was involved in the unsealing of the tank. Without any specific evidence as to the identity of the intended victim of the silage smell, who is the target for these actions? It might be the first pursuer. He is involved with the third defender in relation to the sceptic tank. If that is so, was the second pursuer the intended victim of any action amounting to “harassment”? The second pursuer in the same passage in evidence commented that her husband came in after this incident shaking. He was being affected as well.

Alternatively, both pursuers might be the intended victims as the sceptic tank serves their subjects. Again, when considering the machinery at the boundary, who is the intended victim? The planning application, which, inter alia, related to the erection of the wall on part of the boundary, runs in the first pursuer’s name. Are these actions directed at him or his wife or both? Again, the first pursuer seems to be the guiding hand behind the valuation and offer in early 2010 which Mr Lafferty suggested was viewed as blackmail by the defenders. Is he really the target of the defenders’ actions? Upon what evidence can any specific conclusion be based? Unfortunately I find it extremely difficult to come to any satisfactory solution.

This problem arises in another context. In making this observation I fully appreciate that in cases in which a claim for harassment in terms of s.8 has been established there may be no claim for damages. Further, no alarm or distress may actually have been caused by such harassment. However, in the present case, the second pursuer claims damages. This claim relates to two episodes in the latter part of 2010 and from spring 2013 until June 2014.

During these periods she required medical intervention. There are numerous events which have been the subject of evidence which took place outwith these two periods. One explanation for that could be that the second pursuer was not adversely affected [by] them. This might mean that these events, even when viewed with others, were insignificant and thus did not reach the necessary threshold of what amounts to harassment generally even before reference is made to the legislation. However, another explanation might be that any such actions were not directed at the second pursuer and were not intended to be so directed and thus do not amount to harassment of her in terms of the legislation. Unfortunately neither the pursuers’ averments nor the evidence led assists in coming to any concluded view. The only examples of either of the pursuers being allegedly targeted as individuals related to the couple of instances involving the second pursuer, namely the instance when the third defender sat in the cab of the combine harvester and when he drove a tractor towards the hedge when she was working at it.

The pursuers’ approach was based on the premise that, having involved the authorities in 2009/2010, the defenders felt aggrieved and wished to get back at the pursuers and thus embarked on a campaign of harassment of them. The events averred and spoken to in evidence were acts in this campaign. This ultimately was the theme of their submissions. Mr Lafferty’s cross-examination of the first and second defender was almost exclusively framed in that way.

Indeed, on occasions reference was made to the defenders’ actions amounting to harassment of the pursuers and their family.

In short, the pursuers’ approach was that the defenders have targeted both pursuers and thus I can conclude that for the purposes of the legislation both the first and second pursuers have been targeted individually. I could come to this conclusion notwithstanding the pursuers provided no real indication that

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they wished me to draw such a conclusion either from averment or evidence.

In the circumstances can I do so? As already noted, the matter came before me as a proof, rather than a proof before answer with a preliminary plea reserved, the defenders’ preliminary plea being repelled by implication by the interlocutor of 11 March 2015. Or put another way, the defenders, by not insisting on the reservation of the preliminary plea, have departed from the plea and have prevented themselves from maintaining it—Lewis, Sheriff Court Practice (8th edn), p.127. This is also the thinking behind the provisions of OCR 22. If a proof, as opposed to a proof before answer, is allowed, provided the pursuer proves the facts averred, success follows.

In view of the significance of this issue and the fact that both parties failed to address it in submission, I intimated to the parties through my clerk that I wished to be addressed upon this matter when I dealt with the defenders’ motion No 7/5 of Process on 14 April 2016. It is fair to say that on that date neither party appreciated the significance of the matter. Mr Lafferty for the pursuers accepted that the dicta from Lord Phillips, Patten LJ and Sheriff Braid were accurate interpretations of the legislation. Accordingly, I assigned a further hearing for 5 May 2016 and heard parties’ further submissions then.

The further submissions on behalf of the pursuers are again appended to this note. I had difficulty in following the latter part of Mr Lafferty’s submissions.

After his oral submissions I understand his position to be in effect that both the pursuers were targeted as individuals by the defenders. They were joint proprietors of their subjects and the defenders’ actions were directed against them in that capacity. It was, however, open to me to conclude that the defenders’ actions in all the circumstances would have appeared to a reasonable person to amount to harassment of one of the pursuers but not the other. His somewhat melodramatic reference to ‘occult behaviour’ stressed the underhand and furtive nature of much of the conduct complained of. He further observed that the erection of the wall was a clear indication that both pursuers were prepared to address what they concluded was a problem as a result from the behaviour of the defenders. In response to para.17.12 of Macphail, Sheriff Court Practice (3rd edn), Mr Lafferty invited me to adopt what was said there.

When referred to para.8.63 of Macphail, he invited me to adopt the view that any issue of relevancy had been superseded in light of a proof being assigned.

Mr Morris conceded that the issue I raised had not been one covered in his rule 22 note nor had it formed part of his submissions. The issue was one for me to determine. I formed the clear view that he did not adopt the criticism I had made of the pursuers’ case in a manner consistent with someone who had had the scales removed from his eyes! In relation to para.8.63 of Macphail he considered that the allowance of a proof did not prevent a legal matter being raised.

In his further submission, Mr Lafferty relied strongly upon the decision of the Court of Appeal Levi v Bates. That decision, at least superficially, is of some assistance to the pursuers. The lead judgment is given by Briggs LJ. In paras.3 and 4 his Lordship observes that it may happen that a course of conduct targeting one person causes alarm and distress to another, even although that latter person is not the target of the harassment, albeit it might well be reasonably foreseeable that that latter person might be so harmed.

Damage to such a person may arise because they are closely related to the intended target of the misconduct. However it might also occur because the particular nature of the conduct complained of causes the other person harm.

In para.29 his Lordship concludes that what matters is that the conduct complained of is targeted at an individual, albeit it may not be the claimant,

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provided the claimant is foreseeably likely to be directly harmed by that conduct. The claimant has to be a victim of the relevant course of conduct in the sense that the conduct has some direct effect on the claimant (para.33). As a result a claim for harassment is open not only to the target of the conduct but also persons foreseeably and directly harmed by it (para.34). In considering Levi, it should not be overlooked that s.8 of the 1997 Act which applies to Scotland is perhaps more specific than ss.1 and 3 which relate to England. In particular s.8(1)(b) extends the statutory protection to circumstances where it would appear to a reasonable person that the course of conduct would amount to harassment of the individual concerned. It appears to me that Levi fits comfortably within that provision.

On reflection I do not consider that Levi v Bates really takes Mr Lafferty much further. The pursuers’ averments and as a result the evidence did not specify the individual who was the victim of the relevant course of conduct.

Nor do they specify in what circumstances certain actions could be viewed by a reasonable person as harassment of an individual. The observations made previously appear to me still to be valid. Of greater assistance to the pursuers’ position on this point is that the matter came before me as a proof. All preliminary pleas had been superseded. Although no interlocutor specifically recorded this, the interlocutor of 11 March 2015 does this by implication in assigning a diet of proof. In addition, the matter that has troubled me was never the subject of a rule 22 note from the defenders. Whilst two such notes were lodged, neither dealt with this matter. The aim of OCR 22 is to avoid litigation by ambush. Hence the requirement for the note and the provision in OCR 22.1(4) that it is only on cause shown that matters additional to those in such a note can be raised at a proof before answer or debate. Accordingly, even if the parties had been engaged in a proof before answer, the defenders would still have required to show cause to argue this matter. It should not be overlooked that that provision was introduced in 2000 and its effect further emphasised the intention behind the provisions to avoid litigation by ambush.

In para.17.12 of Macphail in dealing with proofs before answer it is observed that if the “pursuer has given the defender sufficient notice of his case, as may appear . . . . from the withdrawal of a plea to the relevancy or from the absence of objections to evidence, it is inappropriate after proof before answer to subject the Pursuer’s averments to the degree of scrutiny appropriate to a debate on relevancy or an objection to the admissibility of evidence with the result of denying the Pursuer a remedy which in justice he is entitled to receive”. That passage is supported by reference to Maitland v Bingorama Ltd, a decision of Sheriff Principal Reid, which itself referred to a decision from Sheriff Principal Sir Allan Walker in O’Connor v McRobb. A muddle the pursuers’ averments may be and the evidence led, as a consequence, was not focused as it should have been. However, it is clear that the pursuers’ case in essence was that they had each been the victim of harassment at the hands of the defenders either as intended by the defenders or in circumstances in which it would have appeared to a reasonable person that the defenders’ actions amounted to harassment of the first pursuer and the second pursuer. A section in the other passage in Macphail, para.8.63, to which I referred parties indicated that two approaches might be taken if a proof was allowed. One was that no arguments regarding relevancy would be entertained. The alternative was an erroneous finding in law could be attacked on appeal notwithstanding there was no supporting plea. The support for that second proposition is the decision from Sheriff Principal Caplan in Newcastle Building Society v White. I would make three observations regarding that decision. The first is that Sheriff

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Principal Caplan did not come to any concluded view on the matter. The second is that a plea to the relevancy had been timeously taken and had been debated. It was thus open to the pursuers to revisit the decision regarding that plea at an appeal after proof. In this case, the defenders had not debated their plea and had allowed it to be repelled by implication when the proof was allowed. Finally, the decision of Sheriff Principal Caplan was reached prior to the introduction of the Ordinary Cause Rules 1993. In those circumstances, I consider that it appropriate to conclude that these issues of relevancy are indeed superseded. Accordingly, I now consider whether the actions of the defenders amount to harassment and thereafter constitute harassment of the pursuers or either of them in terms of the 1997 Act. In looking at whether conduct amounted to harassment, Lord Nicholls of Birkenhead in Majrowski v Guy’s and St Thomas’s NHS Trust, para.30 observed that courts will have in mind that irritations, annoyances, even a measure of upset, arise at times in everybody’s day-to-day dealings with other people.

Courts were well able to recognise the boundary between conduct which was unattractive, even unreasonable, and conduct which was oppressive and unacceptable. The latter will form the basis of a claim for harassment. In Jones v Ruth at para.24 Patten LJ observed that harassment means the persistent tormenting or irritation of the victim. It might range from actual physical force or the threat of force to much more subtle but none the less intimidating conduct.

Against these observations I do not consider that the rat problem in 2009/10 would amount generally to harassment. I accept that this episode would have been most unpleasant and the defenders may have not initially taken the infestation that seriously. I refer to the comment made to the effect that you can never get rid of rats. The second pursuer also had to take the initiative in contacting Go Pest. However, once that concern was involved, the defenders cooperated. They took remedial steps by reducing cover for the rats by the removal of debris and spraying vegetation. I accordingly do not consider that this conduct amounted to persistent tormenting or irritation of either or both pursuers. In any event, the necessary intention or reasonable conclusion required for the purposes of the legislation is, in my opinion, absent. The defenders were not targeting the pursuers.

I am further not prepared to consider operations at Gourdiehill Farm Steading between mid-August and the start of October 2010 amounted to harassment. At that time the defenders were involved in operations associated with the harvest. During the harvest, farmers and their employees are regularly seen working late into the night to ingather the crops. I fully appreciate the disturbance this caused the second pursuer, in particular. However, the effects of these actions were not brought to the defenders’ attention until mediation.

Once they were, there has not been any repeat. In addition, I am not satisfied that the necessary intention can be inferred. Similarly I do not consider in the circumstances that it can be said in the circumstances that a reasonable person would have concluded that these actions amounted to harassment.

I also consider that some of events complained of between the end of 2010 and March 2013 do not amount to harassment. In reaching that conclusion I do not overlook the observations made by Lord Hardie in Marinello v City of Edinburgh Council to which I have already referred made. I place the bonfire episodes within the category of irritation and annoyance as opposed to oppressive and unacceptable behaviour. The bonfires were sited quite some distance from the pursuers’ subjects. Whilst no doubt the smell and smoke from such fires might at times have drifted across to the pursuers’ subjects and

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been unpleasant, I do not consider that these instances satisfy the definition to which I have referred. Mr Morris, in his submissions, made certain observations concerning the lack of evidence in relation to fires from third parties. Whilst this is a pertinent comment to make, it would not be necessary to establish harassment for evidence from such sources to be led. What satisfies the definition of harassment is the persistent torment or irritation. That does not necessarily have to be something which would require action involving a third party. Quite simply on the basis of the evidence I heard in this regard, I do not consider the defenders’ actions satisfy that definition. Further I do not consider that the pursuers have proved the necessary intention or reasonable conclusion required for the relevant statutory provision in relation to the bonfires.

There is another reason for my reaching this conclusion regarding the bonfires. The pursuers produced medical evidence relating to treatment the second pursuer received from 2009. These cover two distinct periods, the second half of 2010 and from March 2013 until June 2014. She was also regularly on her own for considerable periods during the intervening period, her husband regularly working abroad until January 2014. Having consulted her doctor in 2010 regarding problems she had with the defenders, if these activities in the intervening period had been more than irritating and annoying, I would have expected the second pursuer to be back at her doctor.

There are, however, a number of instances in which the defenders’ conduct does amount to harassment. I consider the poisoning of the pursuers’ dogs and the application of herbicide to the hedge and saplings on occasions between the summer of 2010 and the end of 2012 amount to harassment.

These incidents were not the result of inadvertent action on the part of the defenders which might cause annoyance. Rather they were deliberate actions which were oppressive and unacceptable. The defenders knew exactly what they were doing. There are also the events which follow the sceptic tank incident. I am satisfied that these events fall within the general definition of harassment although I do not consider the sealing of the sceptic tank lid itself amounts to an episode of harassment. The defenders’ actions amount to behaviour which was more than irritating and annoying. They amounted to persistent tormenting or irritation. The defenders had concluded, wrongly in my opinion, that the smell complained of came from the sceptic tank. Once the first pursuer had taken remedial action, the defenders responded “in kind” unwrapping and leaving silage at the boundary and other actions which, when seen in context, crossed the boundary and constituted behaviour both oppressive and unacceptable.

At this point I also consider that it is appropriate to deal with the issue of whether the evidence of Mr Stephen Melville is admissible as a skilled witness.

Who properly qualifies as such a witness has recently been examined by the Supreme Court in Kennedy v Cordia (Services) LLP. In that decision their Lordships observed that there were four governing principles in deciding whether the evidence provided by a witness fell within the category of skilled evidence. Did the proposed evidence assist the court in its task? Did the witness have the necessary expertise? Was the expert impartial in the presentation and assessment of the evidence? Was there a reliable body of knowledge or experience to underpin the expert’s evidence?

Mr Melville has farmed 320 acres since 2008, having been brought up on a farm. He graduated in a B Sc(Hons) in Agriculture from the University of Edinburgh in 1999.

The matter upon which he gave evidence which I consider relevant to the issues in this case related to silage and what occurred when it was unwrapped.

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Whilst a number of the observations made by the defenders carry a degree of weight, I do not consider that they are of such significance when regard is had to this matter. He confirmed what occurred when silage was unwrapped if left unused. A foul smelling odour would be produced as a result of the contents deteriorating. Opened bales of silage were simply not left around unused. By reference to Kennedy, that evidence assisted the court. The witness had, in my opinion, the necessary expertise. His evidence in relation to the consequences of unwrapping bales of silage was not challenged in cross-examination. He confirmed that this was unusual behaviour. This was understandable bearing in mind the purpose behind the preparation of silage, namely to feed livestock.

The purpose behind his evidence on this point was to advise what would happen when silage was left unwrapped. As a consequence bales of silage were not unwrapped and left unused.

At this point I shall deal with the matter of the defenders’ state of knowledge.

Mr Morris raised this both during evidence and in submission. He argued that if the pursuers did not bring their complaints to the attention of the defenders then it was impossible to conclude that the defenders’ actions amounted to harassment of the pursuers. The actions complained of were not out of the ordinary. They took place on a working farm. There are certain observations to be made in this regard. Dealing with the opened silage bales, the defenders would be well aware of the consequences if bales of silage were opened and then left. They were left on the boundary. The prevailing wind in the locality blew the resultant smell to the pursuers’ subjects. This action took place immediately after the “septic tank episode”. The defenders had not acted in this manner before. The intention behind the defenders’ actions was obvious.

They caused an objectionable smell in response to their belief that a smell was coming from the pursuers’ sceptic tank. I shall deal with the issue of parking farm machinery on the boundary in the following paragraph. However, to deal again with the issue of awareness, this was an issue raised at the mediation meeting in early 2011. Further it seems to me clear that the actions after May 2012 are directly linked with the erection of the wall. The defenders are simply attempting to make the pursuers aware that the wall is ineffective in obscuring any view of farm machinery.

The instances regarding the farm machinery from 2010 might at first sight appear to amount simply to irritation and annoyance as opposed to oppressive and unacceptable behaviour. In my opinion, that conclusion in this case is reached only if the actions are viewed in isolation as individual events. When seen in context, they form part of a course of conduct which amounts to harassment. I reached this conclusion for a number of reasons. All the actions which I have concluded amount to harassment are carried out at the boundary of the two subjects. The pursuers complained of their visual amenity being adversely affected. The wall was built, in part, to counter that. The defenders are deliberately respond[ing] to the actions of the pursuers.

These conclusions as to what fell within the general definition of harassment mean that I am not prepared to grant interdict in terms of crave 2(i), (ii), and (iii). I should say that in any event I find the terms of these craves odd. In crave 2(i) what is meant by “inadequate husbandry, buildings maintenance”? That is not specific and I would not have been prepared to grant the order in those terms. Crave 2(ii) seems to be aimed at failing to cover the grain as opposed to the drying operations themselves. Crave 2(iii) relates to the burning of plastics but not anything else. Burning any material might amount to harassment but it is plastics which is the target of the order. For similar reasons I am not prepared to grant a non-harassment order in terms of crave 3(ii)–(iv).

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I would not be prepared to grant an order in terms of crave 3(i). There was no evidence that such activity satisfied what would constitute harassment.

Turning to the septic tank, I also consider that this was a one-off. It was a precursor to the actions regarding the silage bales and was not as such an act of harassment. In any event, as I consider that it was a one-off and would not have been repeated, I shall not grant an order in terms of crave 2(iv) and 3(v).

Similarly I consider the incident involving rat poison a one-off and would not have been repeated. Accordingly, I shall not grant an order in terms of crave 2(vii) and 3(viii).

This leaves the orders sought in terms of craves 2(v), (vi), and (viii) and 3(vi), (vii), and (ix). I have already concluded that these events satisfy the general definition of what constitutes harassment, for reasons already explained.

I further consider that the defenders acted on those occasions intending to harass the pursuers or one or other of them. By the actions undertaken by the pursuers regarding Gourdiehill Farm Steading from late 2009, they became a source of considerable annoyance to the defenders. As a consequence the defenders embarked on actions which amounted to harassment. The spraying of the hedge, plant pots, and saplings on the pursuers’ subjects were intentional acts. As I have already observed they knew what they were doing. Their actions in relation to the silage were in response to the smell they erroneously considered was caused by the pursuers’ sceptic tank. Their repeated actions were clearly intended persistently to torment the pursuers. Again, the defenders knew full well what the consequences of their actions would be for the pursuers.

To plead innocence, as was suggested by Mr Morris, on the basis that no one had said anything and thus the defenders were unaware of these consequences, is simply unsupportable. It was clear what the consequences of their actions would be. The dung-filled bogey simply continued this torment. To that end the pursuers gone part of the way to satisfy what is required in terms of the Protection from Harassment Act 1997.

However, I do not consider that an order for interdict or a non-harassment order can be competently granted in favour of the pursuers in the present action of harassment founded upon the statutory provisions. The legislation provides a remedy to an individual and the order sought requires to be in the name of that individual. The reason for this is clear. The legislation prohibits harassment of an individual and provides such a person alleging such harassment, with various remedies including interdict and a non-harassment order. Those remedies are personal to that individual. Another person may have also been the subject of the same harassment at the hands of the same wrongdoer. However, this person must seek separate remedies. Accordingly, there require to be separate orders sought in the name of the each pursuer as opposed to, what are in effect, joint orders. The reason for that is simple. If the wrongdoer is subsequently alleged to have acted in breach of the interdict or non-harassment order by acting in the manner prohibited against one of the parties but not the other, then such a joint order has not been breached. The behaviour prohibited by any such order is harassment of an individual and thus the order granted is in favour of that individual. For instance, craves 2(v) and 3(vi) are aimed at the unpleasant smell resulting from such action. If one or other pursuer was not present in future when it was alleged that the defenders acted in breach of the order in terms of those craves, an application for breach could not be raised in the name of both pursuers. The same observation applies to craves 2(vi) and 3(vii). Actions said to be in breach of any order might adversely affect one or the other pursuer’s visual amenity. It might well not adversely affect both at the same time. Orders in terms of crave

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2(viii) and 3(ix) appear to arise more from the pursuers being the proprietors of their subjects. However, the same observation is, in my opinion, valid.

Accordingly, I consider that these orders in terms of craves 2(v), (vi), and (viii) and 3(vi), (vii), and (ix) cannot be granted in the name of both pursuers. The fact that in crave 2 the pursuers seek an interdict against conduct which amounts to harassment of them or either of them does not, in my opinion, assist. The order is still being sought in the name of both pursuers. What interest would one have seeking a finding that such an order had been breached as a consequence of actions targeted against the other?

The pursuers’ problems do not, in my opinion, end there. The pursuers firstly sought to amend the orders sought in craves 2(v) and (viii) and 3(vi) and (ix). Mr Lafferty proposed that “and north western” be inserted before “boundary” in the fourth line of crave 2(viii) and 3(ix) and that, as a result of amendments, craves 2(v) and 3(vi) now read “by unwrapping and storing exposed silage, dung or any noxious material at or close to the pursuers’ north western and south western boundaries”. In so moving me to amend, Mr Lafferty submitted that the amendments reflected the evidence which had been led. This motion was opposed by Mr Morris. He submitted that the amendment came too late. There had been many previous attempts to amend.

Questioning in cross-examination had been directed at the craves which the defenders had faced at the time of the proof. There had been confused evidence from Mr Ballingall regarding the location of the spraying. There was no suggestion that the problem regarding spraying related to the north-western boundary.

Dealing with the amendment, I am prepared to grant it. The effect of the amendment seems to me to be minimal. Turning to the terms of the orders now sought, craves 2(v), (vi), and (viii) and 3(vi), (vii), and (ix) are in identical terms. Dealing with crave 2(v) and 3(vi) there are a number of problems. The grant of any order has serious consequences for the defenders. It has to be clear what they are prohibited from doing. How far from the boundary is “close to”? What constitutes “noxious material” is undoubtedly a subjective matter? The subjects at Gourdiehill Farm Steading form part of a farm. The exposure of silage and storage of dung on such subjects is not per se unusual.

The mischief is exposure and storage for an excessive period. I consider it would have been necessary to refer to a specific period so that it was clear what and what was not prohibited. Similar observations could be made in relation to craves 2(vi) and 3(vii). How close is “close up”? Is the prohibition directed at both parking vehicles and impinging upon visual amenity? What happens if a vehicle is parked close up against the boundary wall but is not visible from the pursuers’ subjects? What constitutes visual amenity is subjective. These problems do not per se arise in connection with crave 2(viii) and 3(ix).

However, bearing [in] mind the number of occasions such activity had taken place and that the last incident took place in around May 2012, I would not have been prepared to grant perpetual interdict or a non-harassment order regarding that activity. In addition, the boundary is now covered by CCTV and that appears to have acted as a significant deterrent for such activity. For these additional reasons I am not prepared to grant the orders sought.

Turning to the crave for damages for the second pursuer, Mr Lafferty alone referred me to what he considered was an appropriate figure for damages. In submission he suggested that the sum of £5,000 was an appropriate award for the distress and anxiety suffered by the second pursuer as a result of the actions of the defenders. Interest would operate on that sum. A further sum of £777.59 should be added for expenditure incurred by her in respect of the

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hedge and work she carried out on the hedge. In support of the claim for distress and anxiety, Mr Lafferty referred me to Vento v Chief Constable of West Yorkshire; Marjowski v Guy’s and St Thomas’s NHS Trust; Ward v Scotrail Railways Ltd; and Jones v Ruth.

The evidence as to the effects of the actions by the defenders upon the second pursuer was rather inspecific. Her husband spoke of the poisoning of the dogs having the greatest effect upon her. He talked of her being far less outgoing, more concerned, stressed, and dreading returning home. She spoke of the machinery parked close to the boundary in 2013 increasing her anxiety.

She confirmed the evidence from her husband as to how she was affected. She spoke of the effects being acute in 2010, being overly anxious in 2012, and the septic tank episode in 2013 “finishing her”. She spoke of panic attacks and her sleep being affected. More detail is provided by the para.10 in the joint minute of admissions, No 28 of Process. However, that paragraph is framed in an equivocal way. It does not state that the second pursuer suffered certain effects as matters of fact. Rather it states that the medical report, No 5/3/1 of Process, is a true and accurate record of complaints and problems reported by her. In the body of that report, there is certainly a suggestion of the prospect of litigation in late 2013/early 2014 affecting the second pursuer. The paragraph in the joint minute then sets out specifically what was reported at each attendance at her general practitioner and what was prescribed.

I am prepared to accept that the second pursuer suffered tearfulness and stress, anxiety and panic attacks for around five months in the second part of 2010 requiring her attendance at her GP on four occasions. Account, however, has to be taken of the fact that events during the harvest of 2010 are likely to have contributed to the second pursuer’s condition during that period. I have concluded already that these actions do not constitute harassment. Accordingly, the only actions relevant to this period relate to the poisoning of the dogs and the spraying of the pot plants. These actions were the start of the course of conduct embarked upon by the defenders as a result of their annoyance with the pursuers’ actions from late 2009 regarding Gourdiehill Farm Steading. In March 2013 she again suffered low mood and anxiety and this continued for around 18 months. The evidence from the second pursuer, in particular, is consistent with what is set out in the joint minute. There was no challenge to her evidence in this regard. I consider that the foregoing authorities referred to by Mr Lafferty deal with consequences more severe than those suffered by the second pursuer. There was no referral for psychiatric input. In Vento the plaintiff was described as clinically depressed and suffered suicidal impulses.

In Jones the award of damages in respect of the harassment aspect of the claim covered the plaintiff suffering psychiatric symptoms resulting in her undergoing cognitive behaviour therapy and counselling. The duration of the behaviour complained of appeared to be longer. It appears to me that the decisions in Quinn v Monklands District Council and Louden v Chief Constable of Police Scotland are of greater assistance. In the former the ordeal lasted over three winters and thus the award of £2,500 by way of solatium was in respect of a slightly longer period. In the latter decision Sheriff Veal awarded £1,500 to the pursuer who suffered from an adjustment disorder with mixed anxiety and depressive reaction for around 12 months. The present consequences experienced by the second pursuer appear to be more long-lasting. Taking into account when these decisions were made and the operation of inflation since, I consider that a reasonable award of solatium for the second pursuer is £3,000. In addition, I shall recompense the second pursuer for the outlays for the hedge amounting to £65.99. Further, I shall award her £200.00 in respect

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of inconvenience in having to carry out remedial work to the hedge caused by the defenders’ actions which had an adverse effect upon the hedge. The second pursuer was a keen gardener and thus would have worked on the garden in any event. However, she was involved in additional work. She described this as weeding-out plants, planting new hedge plants, and treating these plants. The basis upon which the sum of £711.60 is sought is not specified either in averment or evidence. Interest can run on those figures in terms of s.1 of the Interest on Damages (Scotland) Act 1971. Section 1(1) of that Act applies to interlocutors decerning for payment of a sum of money as damages as is claimed in the present case. It seems to me to be perfectly appropriate that interest runs from earlier dates than the date of decree. The losses were sustained some time earlier. In view of the fact that there are two periods during which the second pursuer suffered medically, I think justice is done by allowing interest to run on the whole award at 4 per cent annually from 1 March 2013. In relation to the other awards, interest on the sum of £65.99 shall run at 8 per cent annually from 20 April 2012. Interest on the sum of £200.00 shall run at 4 per cent annually from 1 June 2011. There are three episodes regarding the hedge, all of which required further work from the second pursuer. To deal with interest in this way seems appropriate.

In conclusion I am prepared to award the second pursuer damages as I have already specified. I have, however, refused to grant any of the orders sought by the pursuers in the form of interdict or non-harassment orders. I would express a word of caution for the defenders at this point. They should be left in no doubt that I consider that their actions are such that they have acted in contravention of the 1997 Act towards one or other pursuer and quite possibly both. There are a number of reasons why no preventative order has been made against them but they should be on notice regarding their future conduct. It might be that future instances of such behaviour would result in remedies in terms of the 1997 Act being granted. Further it did seem to me that other remedies might be open to the pursuers. These were not considered in the present action. The terms of the 1997 Act were preferred instead to the exclusion of other grounds of action.

A hearing on expenses is appropriate and I have assigned one for parties to address me. I have to say that it is unfortunate that the matter which troubled me was not subject of argument at debate. At that stage this would either have resulted in the action being dismissed at considerably less cost to the parties or, the flaws in the pursuers’ case having been disclosed, the necessary amendment would have resulted in focus being applied to what was required in averment and thereafter to the evidence necessary to satisfy the statutory provisions. Such focus would have been of considerable benefit to all. It may have resulted in a shorter proof with the resultant reduction in expense.

For the pursuers: Hodge Solicitors, Blairgowrie.

For the defenders: Blackadders, Solicitors, Perth.

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A SUPREME COURT

6 July 2016

Lady Hale (Deputy President), Lord Mance, Lord Reed, Lord Carnwath and Lord Toulson CAMPBELL B

Appellant

against GORDON

Respondent

Reparation—Employers liability—Breach of statutory duty— Employer’s duty to insure—Director failing to have insurance effected—Whether breach by company of obligation to insure gives rise to civil liability of director—Employers’ Liability (Compulsory Insurance) Act 1969 (c.57) C

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Section 1 of the Employers’ Liability (Compulsory Insurance) Act 1969 provides, inter alia: “Insurance against liability for employees.

(1) Except as otherwise provided by this Act, every employer carrying on any business in Great Britain, shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business. . . .”

The appellant was employed by a company as an apprentice joiner and the respondent was the only director of the company and responsible for its day-to-day operation. The appellant was injured while working an electric circular saw. Although the company had employers’ liability insurance policy the policy excluded claims arising from the use of woodworking machinery powered by electricity. The company’s failure to have in place appropriate insurance was a breach of its obligations under s.1(1) of the Employers’ Liability (Compulsory Insurance) Act 1969. The sole issue in the case was whether civil liability attached to the respondent for that failure. The claim was upheld by the Lord Ordinary but dismissed by the Inner House by a majority. The appellant appealed to the Supreme Court.

Counsel for the appellant argued that the circumstances of the instant case were governed by an exception to the general rule that where a statute imposed an obligation and imposed a criminal penalty for failure to comply there was no civil liability. The exception was where upon the true construction of the Act the obligation or prohibition was imposed for the benefit or protection of a particular class of individuals, as in the case of the Factories Acts and similar legislation. The exception was directly applicable to the instant case.

Counsel for the respondent pointed out that the statutory background of the wording of s.5 showed that provisions in similar form, imposing criminal liability on directors and other officers for offences by the companies, had a long history and there were very many examples of that type of formula and yet there was no reported authority which suggested that it might be treated as having given rise to civil liability.

Held (per Lord Carnwath (with whom Lord Mance and Lord Reed agreed)) that even assuming that the words of Lord Diplock remained a reliable guide, at least in relation to statutory duties imposed for the benefit of employees and proceeding on the basis that the duty of the employer under s.1 of the 1969 434

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Act had been imposed for the benefit of the employees that was nevertheless insufficient for the appellant and the essential starting-point for the formulation was an obligation created by statute, binding in law on the person sought to have been made liable and there was no suggestion in any authority that a person could have been made indirectly liable for breach of an obligation which had been imposed by statute on someone else (para.12); (2) (per Lord Toulson with whom Lady Hale agreed dissenting) that in the instant case, the legislation was plainly intended for the protection of employees and the form of the language employed by the drafter did not take the case in relation to the appellant outside Lord Diplock’s first exception (para.42); and (3) (per Lady Hale dissenting) that the instant case involved a very specific statutory duty which had been imposed upon employers, and also imposed upon specified officers where the employer was a limited company and there could be no difference in substance between imposing criminal liability for failing to do something and imposing a duty to do it and the purpose was to protect a very specific class of people, namely employees who might have been injured by the employers’ breach of duty and the protection intended was that they should be compensated for the injuries even if the employer was unable to do so and failure to insure meant that the employee was denied the very thing that the legislation was intended to provide for him (para.48); and appeal refused.

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Cases referred to: Atkinson v Newcastle and Gateshead Water Works Co (1877) 2 Ex. D. 441 Black v Fife Coal Co Ltd, 1912 S.C. (H.L.) 33; (1912 1 S.L.T. 20 Caparo Industries Plc v Dickman [1990] A.C. 605; [1990] 2 W.L.R. 358; [1990] 1 All E.R. 568 Cutler v Wandsworth Stadium Ltd [1949] A.C. 410; [1949] 1 All E.R. 544 Fairchild v Glenhaven Funeral Services Ltd [2003] 1 A.C. 32; [2002] 3 W.L.R. 89; [2002] 3 All E.R. 305 Groves v Lord Wimbourne, [1898] 2 Q.B. 402 Houston v Buchanan, 1940 S.C. (H.L.) 17; 1940 S.L.T. 232 Lonhro Ltd v Shell Petroleum Co Ltd (No 2), [1982] A.C. 173; [1981] 3 W.L.R. 33; [1981] 2 All E.R. 456 Monk v Warbey [1935] 1 K.B. 75 Morrison Sports Ltd v Scottish Power UK plc [2010] UKSC 37; 2011 S.C. (U.K.S.C.) 1; 2010 S.L.T. 1027 Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 K.B. 1 R v Deputy Governor of Parkhurst, ex parte Haguei [1992] 1 A.C. 58; [1991] 3 W.L.R. 340; [1991] 3 All E.R. 733 Rainham Chemical Works v Belvedere Fish Guano Co [1921] 2 A.C. 465 Richardson v Pitt-Stanley [1995] Q.B. 123; [1995] 2 W.L.R. 26; [1995] 1 All E.R. 460 Rickless v United Artists Corporation [1988] Q.B. 40; [1987] 2 W.L.R. 945; [1987] 1 All E.R. 679 X (Minors) v Bedfordshire County Council [1995] 2 A.C. 633[1995] 3 W.L.R. 152; [1995] 3 All E.R. 353.

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On 6 July 2016 the following judgment was given. The full circumstances of the case and the arguments of counsel are to be found in the judgment of Lord Carnwath.

LORD CARNWATH (WITH WHOM LORD MANCE AND LORD REED AGREE) 1. The appellant, Mr Campbell, was employed by the company (the first respondent) as an apprentice joiner. The second respondent, Mr Gordon, was

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the sole director of the company and responsible for its day-to-day operation.

On 28 June 2006 the appellant suffered an injury whilst working with an electric circular saw. Although the company had employers’ liability insurance policy, the policy (surprisingly for a business of this kind) excluded claims arising from the use of “woodworking machinery” powered by electricity. It therefore excluded any claim arising out of Mr Campbell’s accident. The company’s failure to have in place appropriate insurance was a breach of its obligations under s.1(1) of the Employers’ Liability (Compulsory Insurance) Act 1969.

2. The company itself went into liquidation in 2009. Mr Campbell now seeks to hold Mr Gordon, as director, liable in damages for the company’s failure to provide adequate insurance cover. Mr Gordon himself is recently bankrupt. We were told by Mr Smith QC, appearing for Mr Campbell, that there are discussions with him with a view to obtaining an assignation of any rights he may have against the broker who arranged the inadequate insurance.

However, the sole issue for us is whether civil liability attaches to Mr Gordon for that failure.

3. The claim was upheld by the Lord Ordinary, but dismissed by the Inner House by a majority (Lord Brodie and Lord Malcolm, Lord Drummond Young dissenting). In this respect they arrived at the same conclusion, albeit not by identical reasoning, as the English Court of Appeal in Richardson v PittStanley (Russell and Stuart-Smith LJJ, Sir John Megaw dissenting).

4. The foundation of the claim has to be found in the 1969 Act. The primary duty to insure is placed on the employer by section 1, which provides: [His Lordship quoted the section as set out above and continued:] Section 4 provides for regulations governing the issue of certificates of insurance and their display for the information of employees and production on demand to inspectors duly authorised by the Secretary of State. These also are obligations placed on the employer.

5. Section 5 which is at the heart of the appeal provides, as amended: “Penalty for failure to insure.

“An employer who on any day is not insured in accordance with this Act when required to be so shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding level 4 on the standard scale; and where an offence under this section committed by a corporation has been committed with the consent or connivance of, or facilitated by any neglect on the part of, any director, manager, secretary or other officer of the corporation, he, as well as the corporation shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.” (emphasis added) 6. On its face that is an unpromising basis for Mr Campbell’s present claim.

This provision does not in terms impose any duty to insure on a director or other officer as such, let alone any civil liability for failure to do so. The duty rests on the corporate employer. The veil of incorporation is pierced for a limited purpose. It arises only where an offence is committed by the company, and then in defined circumstances imposes equivalent criminal liability on the director or other officer on the basis, not that he is directly responsible, but that he is “deemed to be guilty” of the offence committed by the company.

7. For the appellant Mr Smith relies on well-established principles governing civil liability in respect of statutory obligations. He accepts that as a general rule, where a statute imposes an obligation and imposes a criminal penalty for failure to comply, there is no civil liability; but that is subject to exceptions, including, “where upon the true construction of the Act it is apparent that the

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obligation or prohibition was imposed for the benefit or protection of a particular class of individuals, as in the case of the Factories Acts and similar legislation”, per Lord Diplock, Lonrho Ltd v Shell Petroleum Co Ltd (No 2) at p.185.

8. There are many examples of this exception in practice, dating back more than 100 years, for example (in England) to Groves v Lord Wimborne, relating to the Factory and Workshop Act 1878, and in Scotland in Black v Fife Coal Co Ltd, concerning the Coal Mines Regulation Act 1887. In the latter case, Lord Kinnear said (pp.45 and 165–166): “We are to consider the scope and purpose of the statute, and in particular for whose benefit it is intended. Now the object of the present statute is plain. It was intended to compel mine owners to make due provision for the safety of the men working in their mines, and the persons for whose benefit all these rules are to be enforced are the persons exposed to danger. But when a duty of this kind is imposed for the benefit of particular persons, there arises at common law a correlative right in those persons who may be injured by its contravention. Therefore I think it is quite impossible to hold that the penalty clause detracts in any way from the prima facie right of the persons for whose benefit the statutory enactment has been passed to enforce the civil liability.”

9. The same principle was applied to a failure to insure, in the context of motor insurance, in Monk v Warbey. Section 35 of the Road Traffic Act 1930 made it illegal to use or to cause or permit any other person to use a motor vehicle on a road unless there was in force in relation to the user of the vehicle a policy of insurance against third-party risks that complied with the requirements of the Act. It was held by the Court of Appeal that, where the owner of a car permitted its use by a person uninsured against third-party risks and injury to a third party was caused by the negligent driving of that person, the owner was liable in damages to that third party for breach of his statutory duty to insure. That was followed in Scotland in Houston v Buchanan.

10. Mr Smith submits that Lord Diplock’s words are directly applicable to this case. The duty in question was imposed for the protection of employees such as Mr Campbell, and the context is identical to that of the Factories Acts.

In its application to the duty to insure, he submits, the case is indistinguishable from Monk vWarbey. As a “cross-check” of the appropriateness of such liability, he relies on the tri-partite test set out by Lord Bridge in Caparo Industries plc v Dickman, pp.617–618 for a duty of care in negligence, including foreseeability, proximity and fairness. He relies also on the statement of Lord Bingham in Fairchild v Glenhaven Funeral Services Ltd, referring to the “strong policy argument in favour of compensating those who have suffered grave harm, at the expense of their employers who owed them a duty to protect them against that very harm and failed to do so”. Mr Smith submits that the contrary conclusion arrived at by the English Court of Appeal in Richardson was based on a flawed analysis, not least the view of Stuart Smith LJ (p.131E–H) that the duty to insure was for the benefit of the employer rather than the employee.

He relies on the detailed criticism of that decision by Lord Drummond Young in the Inner House.

11. In the court below, and in argument before this court, there was some discussion whether Lord Diplock’s statement of the exception represented the modern law. Lord Brodie thought that it needed to be seen in the light of more recent judicial statements of high authority, which he read as placing less emphasis on definitive presumptions, and more on the need to ascertain the

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intention of Parliament in enacting the particular provision (paras 10, 20). He referred in particular to statements by Lord Rodger in Morrison Sports Ltd v Scottish Power UK plc, at paras 28–29, 41, citing in turn the judgment of Lord Browne-Wilkinson in X (Minors) v Bedfordshire County Council, pp.731–732; and by Lord Jauncey in R v Deputy Governor of Parkhurst, ex parte Hague, pp.170H–171A. This view finds some academic support in Professor Stanton’s work on Statutory Torts (2003), paras 2-019-2–020.

12. For my part I find it unnecessary in this appeal to engage in discussion of the extent to which Lord Diplock’s formulation has been modified by later authorities. I would only observe that the statements of Lord BrowneWilkinson and Lord Jauncey referred to by Lord Brodie were made in the context of cases concerning liability of public authorities, which may raise rather different issues. I am content to assume (without deciding) that Lord Diplock’s words remain a reliable guide at least in relation to statutory duties imposed for the benefit of employees. I would also proceed on the basis (agreeing in this respect with Sir John Megaw in the Richardson case: p.135C–D) that the duty of the employer under s.1 of the 1969 Act was imposed for the benefit of the employees, in the sense indicated by Lord Diplock.

13. This however is not enough for the appellant. The essential startingpoint for Lord Diplock’s formulation is an obligation created by statute, binding in law on the person sought to be made liable. There is no suggestion in that or any other authority that a person can be made indirectly liable for breach of an obligation imposed by statute on someone else. It is no different where the obligation is imposed on a company. There is no basis in the case law for looking through the corporate veil to the directors or other individuals through whom the company acts. That can only be done if expressly or impliedly justified by the statute.

14. Comparison with Monk v Warbey is instructive. The statute in that case (Road Traffic Act 1930, s.35) provided by subs.(1) that it was not lawful for any person “to use, or to cause or permit any other person to use” a motor vehicle on the road unless insured; and by subs.(2) imposed a criminal penalty on “any person” acting in contravention of the section. It was held that civil liability was not excluded by the separate provision creating a criminal offence.

Far from supporting Mr Smith’s arguments, this analogy points in the opposite direction. In that case Parliament dealt specifically with both the user, and any person causing or permitting the use, and determined to impose direct responsibility on each. The 1969 Act imposes direct responsibility only on the employer. The equivalent issue would be whether that is to be treated as giving rise to civil liability on the employer for failure to insure, notwithstanding the criminal liability imposed on him by s.5. That issue (on which there were differences in the courts below) does not arise in this appeal. However, there is no analogy with the position of a director or officer. Parliament has recognised that a director or officer may bear some responsibility for the failure to insure, but has dealt with it, not by imposing direct responsibility equivalent to that of the company, but by a specific and closely defined criminal penalty, itself linked to the criminal liability of the company.

15. I would accept that the adoption of a particular statutory model is not necessarily critical. Lord Brodie (para.12) referred to the decision of the Court of Appeal in Rickless v United Artists Corporation, in which it was held that a provision which on its face “did no more than classify a specified act as a criminal offence did indeed create civil liability”. The relevant provision was s.2 of the Dramatic and Musical Performers’ Protection Act 1958, by which “if a person knowingly . . . makes a cinematograph film . . . from . . . a dramatic

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or musical work without the consent in writing of the performers . . . he shall be guilty of an offence . . .”. Giving the leading judgment Sir Nicholas BrowneWilkinson V-C accepted that the form of the provision pointed against civil liability, “although this point is far from decisive, it is easier to spell out a civil right if Parliament has expressly stated the act is generally unlawful rather than merely classified it as a criminal offence” (p.51G–H). However, he held that other factors showed an intention to create civil liability, including the clear purpose of providing protection for performers, and the need to comply with this country’s obligations under the relevant international conventions (p.53A). This accordingly was a somewhat special case. But there was no suggestion that civil liability could be imposed other than on those made directly responsible by statute for compliance with the primary obligation.

16. Lord Drummond Young gave a number of reasons for extending civil liability to the directors. A corporate employer could only act through its officers who accordingly had a duty to ensure so far as possible that the company fulfils its statutory duties. In that way he thought “it is apparent that section 1, by itself, has the effect of imposing a duty on the directors” (para.43).

He relied also on the common law rules governing liability of directors for acts of the company, citing for example the “relevant principle” as stated by Atkin LJ in Performing Right Society Ltd v Ciryl Theatrical Syndicate, pp.14–15: “Prima facie a managing director is not liable for tortious acts done by servants of the company unless he himself is privy to the acts, that is to say unless he ordered or procured the acts to be done. . . . I conceive that express direction is not necessary. If the directors themselves directed or procured the commission of the [wrongful] act they would be liable in whatever sense they did so, whether expressly or impliedly” (emphasis added [sic]) “Consent, connivance and facilitation through neglect” were the criteria for the imposition of criminal liability under s.5 of the Act; “on general common law principles they are also sufficient to render the director civilly liable for the company’s breach of section 1” (paras 44–45).

17. He saw nothing unfair in imposing such liability, given that the director may have “ignored or deliberately disregarded” the existence of the statutory duty and so incurred personal liability, and that, if he has relied on professional advice from an insurance broker, he will have a right of recourse against the broker (para.46). He criticised the majority for an approach which frustrated the policy of the Act “through an over-literal construction” and “an excessively conceptual approach”. In his opinion, the objectives of the Act demanded that a director who has consented to or who has been complicit in a breach of the duty to obtain insurance, or who has facilitated such a breach through neglect, should incur civil liability. “This substantive point should prevail over structural niceties.” (para.47) 18. With respect to him, I do not find these observations helpful in resolving the issue before us, which depends not on general questions of fairness, but on the interpretation of a particular statutory scheme in its context. The fact that the company can only act through its officers tells one nothing about their potential liability to third parties for its acts or failures. The judgment of Atkin LJ to which he refers affirms the rule (supported by reference to a statement of Lord Buckmaster in Rainham Chemical Works v Belvedere Guano Co, p.476) that directors are not in general liable for the tortious actions of the company.

The scope of a potential common law claim against a director for ordering or procuring such a tortious act is not in issue in this case, which turns entirely

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on alleged liability under the statute. This requires the court to pay due respect to the language and structure used by Parliament, rather than to preconceptions of what its objectives could or should have been.

19. My view of the provisions is reinforced by a factor which was not addressed in the courts below or the written cases, but was drawn to our attention by Mr Dunlop QC for the respondent in the course of oral submissions. This concerned the statutory background of the wording of s.5.

It seems that provisions in similar form, imposing criminal liability on directors and other officers for offences by their companies, have a long history. We were told that a Westlaw search (looking for statutory provisions using all three of the words “consent”, “connivance” and “neglect”) had disclosed more than 900 examples of this type of formula, all apparently in the context of corporate offences (although, as Mr Smith pointed out, examples of precisely the same wording are much rarer). This general picture has been confirmed by a similar exercise carried out by legal assistants for the court. We have received nothing from the appellant since the hearing to suggest otherwise.

20. A typical example is found in the Companies Act 2006 itself. Section 1255 (repeating a provision first introduced in this form in 1981) provides: “(1) Where an offence under this Part committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, an officer of the body, or a person purporting to act in any such capacity, he as well as the body corporate is guilty of the offence and liable to be proceeded against and punished accordingly” [emphasis added].

21. A much earlier example to which Mr Dunlop referred us (dating from before the 1969 Act) comes from the Interpretation Act (Northern Ireland) 1954. This is of general application to all corporate offences created by subsequent statutes in Northern Ireland. Section 20(2) provides: “Where an offence under any enactment passed after the commencement of this Act has been committed by a body corporate the liability of whose members is limited, then notwithstanding and without prejudice to the liability of that body, any person who at the time of such commission was a director, general manager, secretary or other similar officer of that body or was purporting to act in any such capacity shall, subject to sub-section (3), be liable to be prosecuted as if he had personally committed that offence and shall, if on such prosecution it is proved to the satisfaction of the court that he consented to, or connived at, or did not exercise all such reasonable diligence as he ought in the circumstances to have exercised to prevent the offence, having regard to the nature of his functions in that capacity and to all the circumstances, be liable to the like conviction and punishment as if he had personally been guilty of that offence” (emphasis added).

22. There are differences of wording between the three statutes. The 1954 statute talks not of “neglect”, as in the 1969 Act and the Companies Act, but of failure to “exercise reasonable diligence”. On the other hand the reference to liability “as if he had personally been guilty” seems to anticipate the language of “deemed” criminal liability in the 1969 Act, but is not replicated in the Companies Act. However, the general pattern is the same in these and in the other examples to which we have been referred. In spite of the apparent frequency of the use of this formula, the researches of counsel and our own legal assistants have not disclosed any reported authority in which its significance or meaning has been considered, nor any previous suggestion that it might be treated as giving rise to civil liability.

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23. I would be reluctant to attach too much weight to a point which has emerged so late in the day. Without more substantial research it is impossible to know to what extent this formula has been used in comparable contexts involving protection of employees. However, to my mind it tends to confirm the view that the language of s.5 was deliberately chosen and is intended to mean what it says. The formula is specifically directed at criminal liability, and as far as we know has always been used in that context. Where Parliament has used such a well-established formula, it is particularly difficult to infer an intention to impose by implication a more general liability of which there is no hint in its actual language.

24. For all these reasons, I would agree with the conclusion reached by the majority of the Inner House and dismiss the appeal.

LORD TOULSON (DISSENTING) (WITH WHOM LADY HALE AGREES) 25. The issue before the court is (a) whether Mr Gordon breached a statutory provision intended for the protection of a particular class including Mr Campbell and (b) if so, whether Mr Gordon should be held liable for Mr Campbell’s resulting loss.

26. Lord Carnwath has set out ss.1 and 5 of the 1969 Act. The object of the Act is that a company’s employees should have the protection, in the event of suffering an illness or injury arising out of their employment for which the company is liable, of the liability being covered by insurance up to a specified sum. Failure by the company to arrange and maintain such insurance carries a penal sanction. But the pool of those bearing legal responsibility for seeing that such protection is in place is not confined to the company itself. It extends to the company’s relevant officer or officers. In order to bring such persons within the pool, the drafter has used the device of a “deeming” provision. The form of the drafting device is that a director, manager, secretary or other officer of the company who consents to, connives at or by neglect facilitates, a failure to maintain the requisite insurance is “deemed” to be guilty of the same offence as the company. The effect in substance is to place on such an officer a legal obligation not to cause or permit the company to be without the required insurance by consent, connivance or neglect, on pain of a criminal penalty. To say that the imposition of criminal responsibility for a specified act (or omission) carries with it a legal obligation not to act (or omit to act) in such a way is to state the obvious. The two are opposite sides of the same coin.

27. The language of deeming involves artificiality. In addressing sub-issue (a), the court has a choice whether to adopt a formalistic approach or to look through the artificiality and consider the function, substance and effect of the provision in real terms. The answer to the question “What does it really do?” is that the provision is a concise means of extending statutory responsibility for seeing that the company is properly insured to the company’s appropriate officer(s), backed by a penal sanction.

28. As an alternative, the drafter might have used words such as: “It shall be illegal for any director, manager, secretary or other officer of a corporation which is an employer carrying on business in the United Kingdom to consent to, connive at or by neglect facilitate a failure by the corporation to insure (etc), and any such person shall be liable on summary conviction (etc)”.

This would have been longer but the practical result would have been the same: the director or officer would have been liable to a criminal penalty for his wrongful act or omission, imposed for the protection of employees.

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29. In his dissenting judgment in Richardson v Pitt-Stanley, p.135, Sir John Megaw made a similar point. He said: “With great respect, I find it difficult to believe that the parliamentary draftsman would have intended to make provision that there should be no civil right or remedy by using the formula of section 1 of the Employers’ Liability (Compulsory Insurance) Act 1969, ‘shall insure’, followed by section 5 ‘shall be guilty of an offence’; as contrasted with the formula of declaring an act or omission to be unlawful and then separately providing a criminal penalty for the breach.”

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I agree.

30. The approach which commends itself to the majority concentrates on the form of the language. It is argued that the structure of the Act is such that the only duty created by it is explicitly placed on the company by s.1(1), and that the mechanism by which a director or other officer of the company is deemed to be guilty of a breach of that duty is consistent with and supports that proposition. I have set out the alternative approach, which looks at the function and substantive effect of the deeming provision in real terms. The choice between a formal approach and a functional approach in the interpretation and application of statutory language is an aspect of the choice between formalism and realism which has been a fruitful subject since as long ago as the publication of Holmes’s The Common Law in 1881. In deciding which approach is preferable, the context matters. The present context is legislation for the protection of a vulnerable group, a company’s employees. In that context I regard the functional approach as more appropriate. I cannot improve on Lord Drummond Young’s pithy statement, in his dissenting opinion in this case, that in the context of legislation aimed at employee protection the formalist approach is “excessively conceptual; it focuses on differences of structure that do not reflect the basic objectives of the statute” (para.47).

31. If, however, a formalist approach is preferred, there should be no half measure about it. On the formalist approach, the director in the eyes of the law is himself guilty of committing an offence under ss.1 and 5. The language of the Act does not impose an accessory liability on the director. It would be unnecessary for that purpose. Rather, it explicitly deems him to be himself guilty of the offence of failing to insure and maintain insurance, etc. As a matter of insurance law, it is of course the insurer who insures and someone else (usually the insured) who procures the insurance, but the meaning of “shall insure, and maintain insurance” in s.1 is clear enough. The effect of the deeming provision is that in the eye of the law the director is guilty as a principal of failing to insure and maintain the necessary insurance. Logic and justice would not permit the director to say that his criminal liability is in substance and reality a form of accessory liability, if one is living in formality land, for, as I have stressed, on the formalist’s approach the director is in law guilty as a principal of failing to insure.

32. On either approach Mr Gordon breached a statutory provision intended for the protection of a particular class, employees, of which Mr Campbell was a member, but I prefer the former approach for the reasons which I have given.

33. As to sub-issue (b), legislation for the protection of employees began in the Victorian age. From the outset the courts have consistently held that breaches of provisions in that class of legislation are actionable at the suit of an employee who suffers from the breach. This was established in Groves v

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Lord Wimborne, a case under the Factory and Workshop Act 1878. Rigby LJ said at pp.414–415: “The provisions of s.5 are intended for the protection from injury of a particular class of persons, who come within the mischief of the Act. The plaintiff is one of those persons, the possibility of injury to whom through neglect to fence machinery the section contemplates. That being so, the only question seems to be whether the provisions of the Act with regard to the imposition of fines for neglect of the duty created by the section reasonably lead to the conclusion that the Legislature intended that such fines should be the only remedy for breach of that duty. I think that, when those provisions are examined, it is impossible to arrive at that conclusion. The maximum fine that can be imposed in any case, however serious the injury may be, is one of £100. It seems monstrous to suppose that it was intended that in the case of death or severe mutilation arising through a breach of the statutory duty, the compensation to the workman or his family should never exceed £100. Again, s.82 does not provide that the fine imposed under it shall necessarily go to the workman if he be injured, or to his family if he be killed; but only that the Secretary of State may, if he thinks fit, order that the fine or part of it shall do so. . . . Looking at the purview of the whole Act, I cannot think it reasonable to suppose that the Legislature intended the penalty imposed by s.82 to be the only remedy for injury occasioned by breach of the absolute statutory duty created by the Act. . . .”

The reference to the “purview of the whole Act” came from the speech of Lord Cairns LC in Atkinson v Newcastle and Gateshead Waterworks Co, p.448.

The maximum fine for an offence under the 1969 Act was originally £200. An offence is committed on any day that a company is not insured in accordance with the Act. 34. Groves v Lord Wimborne was approved by the House of Lords in Butler (or Black) v Fife Coal Co Ltd. Lord Kinnear said at pp.165–166: “We are to consider the scope and purpose of the statute and in particular for whose benefit it is intended. Now the object of the present statute is plain. It was intended to compel mine owners to make due provision for the safety of the men working in their mines, and the persons for whose benefit all these rules are to be enforced are the persons exposed to danger. But when a duty of this kind is imposed for the benefit of particular persons, there arises at common law a correlative right in those persons who may be injured by its contravention. Therefore I think it is quite impossible to hold that the penalty clause detracts in any way from the prima facie right of the persons for whose benefit the statutory enactment has been passed to enforce the civil liability.”

This passage was cited as a statement of general principle by Lord Simonds and Lord Normand in Cutler vWandsworth Stadium Ltd, pp.407–408, 413–414, and by Lord Diplock in Lonrho Ltd v Shell Petroleum Co Ltd (No 2), p.185.

35. As Lord Kinnear’s statement indicates, the cause of action is at common law (except in cases where a statute expressly creates a civil right of action).

The cause of action which was held to exist in Groves v Lord Wimborne was created by the court. It was founded on a statute but it was the court that determined that breach of the provisions of the Act should be actionable at the suit of the injured party for whose protection the provisions were intended.

The conventional jurisprudence is that the court’s function is to ascertain as a matter of interpretation whether Parliament intended that there should be civil liability, but that understates the role of the courts in cases where the legislation is silent on the point. In such cases “the judges face hieroglyphs

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without a Rosetta Stone”, to borrow a metaphor of Judge Richard Posner writing extra-judicially (Divergent Paths—The Academy and the Judiciary, Harvard University Press, 2016, p.172). Judge Posner candidly and correctly states that the judges’ role in such cases is the active role of filling gaps left by the legislature.

36. The courts use a combination of methods for this purpose. They examine the whole purview of the legislation and they employ default rules, with which parliamentary drafters may be taken to be familiar. Lord Du Parcq spelt this out in Cutler v Wandsworth Stadium Ltd, pp.410–411. After a plea that Parliament should reveal its intention in plain words, he said: “. . . Parliament must be taken to have known that if it preferred to avoid the crudity of a blunt statement and to leave its intention in that regard to be inferred by the courts, the ‘general rule’ would prevail unless the ‘scope and language’ of the Act established the exception. It cannot be supposed that the draftsman is blind to the principles which the courts have laid down for their own guidance when it becomes necessary for them to fill in such gaps as Parliament may choose to leave in its enactments.”

37. The default rules were summarised by Lord Diplock in Lonrho Ltd v Shell Petroleum Co Ltd (No 2), p.185: “The sanctions Order thus creates a statutory prohibition upon the doing of certain classes of acts and provides the means of enforcing the prohibition by prosecution for a criminal offence which is subject to heavy penalties including imprisonment. So one starts with the presumption laid down originally by Lord Tenterden CJ in Doe d Murray v Bridges (1831) 1 B & Ad 847, p.859, where he spoke of the ‘general rule’ that ‘where an Act creates an obligation, and enforces the performance in a specified manner . . . that performance cannot be enforced in any other manner’—a statement that has frequently been cited with approval ever since, including on several occasions in speeches in this House. Where the only manner of enforcing performance for which the Act provides is prosecution for the criminal offence of failure to perform the statutory obligation or for contravening the statutory prohibition which the Act creates, there are two classes of exception to this general rule.

“The first is where upon the true construction of the Act it is apparent that the obligation or prohibition was imposed for the benefit or protection of a particular class of individuals, as in the case of the Factories Acts and similar legislation. As Lord Kinnear put it in Butler (or Black) v Fife Coal Co Ltd . . .”

(I have cited the passage which followed.)

38. In his opinion in the present case Lord Brodie said (at para.10) that statements of Lord Kinnear and Lord Diplock are “not the modern law”. For this (to my mind startling) proposition, Lord Brodie relied on the speech of Lord Jauncey in R v Deputy Governor of Parkhurst, ex parte Hague, pp.170–171, and a passage in the speech of Lord Browne-Wilkinson in X (Minors) v Bedfordshire County Council, p.731, cited by Lord Rodger in Morrison Sports Ltd v Scottish Power UK plc, para.28, in a judgment with which the other members of the court (including Lady Hale) agreed.

39. Those three cases were far removed from the area of legislation for the protection of employees. In the passage from X (Minors) v Bedfordshire County Council, cited in Morrison Sports Ltd v Scottish Power UK plc, by Lord Rodger, Lord Browne-Wilkinson began by describing the principles for determining whether a statutory breach gives rise to a cause of action as well established.

He went on to refer to the trilogy of Groves v LordWimborne; Cutler vWandsworth

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Stadium Ltd; and Lonrho Ltd v Shell Petroleum Co Ltd (No 2). He did not suggest that he considered those cases to be “not the modern law”; quite the opposite. Had he intended to depart from long-standing authority, including decisions of the House of Lords, there can be no doubt that he would have said so. Lord Brown-Wilkinson referred to R v Deputy Governor of Parkhurst Prison, ex parte Hague, but only to give it as an example of legislation which was treated not as being passed for the benefit of a particular class of persons (those serving prison sentences), but for the benefit of society in general. It provides an illustration of the need for a purview of the whole legislation in question in order to determine whether it is to be regarded as passed for the intended benefit of a particular class.

40. Lord Brodie and Lord Malcolm each cited Lord Jauncey’s statement in the Parkhurst case, at pp.170–171, that, “The fact that a particular provision was intended to protect certain individuals is not of itself sufficient to confer private law rights of action upon them, something more is required to show that the legislature intended such conferment.” But that sentence should not be taken in isolation. It needs to be understood in its context. The claim in that case was brought by a prisoner who had been deprived for a time of rights of association, by an order of the deputy governor which was held to be in breach of rules under the Prison Act 1952. In addressing the question whether the breach entitled the claimant to damages, the House of Lords held that it was necessary to consider not only the benefit of the rule to the claimant, but the wider purpose of the legislative scheme. In the paragraph immediately following the words quoted above, Lord Jauncey described the objects of the legislation as “far removed from those of legislation such as the factories and coal mines Acts whose prime concern is to protect the health and safety of those who work therein” (emphasis added). In the present case the Act has no purpose other than the protection of employees.

41. The principles summarised by Lord Diplock in Lonrho Ltd v Shell Petroleum Co Ltd (No 2) are no more than general principles or default rules, but they have stood the test of time and I would hold that they continue to be the law unless and until the Supreme Court makes a conscious decision otherwise. In particular, where legislation is passed for the protection of employees, in accordance with Lord Diplock’s first exception, a breach will ordinarily give rise to a potential cause of action, unless the language of the legislation points clearly in the opposite direction.

42. In this case the legislation was plainly intended for the protection of employees and I do not consider that the form of the language employed by the drafter takes the case in relation to Mr Gordon outside Lord Diplock’s first exception. I would allow the appeal.

LADY HALE 43. The question for this court is whether in 1969, when Parliament passed the ss.1 and 5 of the Employers’ Liability (Compulsory Insurance) Act, it was intended that breach of those sections should give rise, not only to criminal liability, but also to civil liability towards an employee who had been injured by the employer’s breach of duty towards him and who, because of the failure to insure, would otherwise not receive the compensation for his injuries to which he was entitled. In my view, it is absolutely plain that Parliament did intend there to be such civil liability.

44. Parliament is presumed to legislate in the knowledge of the current state of the law when it is doing so. In 1969, the law had been clearly laid down in Groves v LordWimborne, approved by the House of Lords in Butler (or Black)

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v Fife Coal Co Ltd, and again in Cutler v Wandsworth Stadium Ltd. Statutory duties imposed upon employers for the benefit of employees who suffer injury as a result of their breach give rise to civil as well as criminal liability, absent a clear statutory intent to the contrary.That is still the law. Parliament understood this when it passed the Health and Safety at Work etc Act 1974, s.47 of which made clear which breaches did not give rise to civil liability, and amended it in 2013, further to restrict the extent of civil liability.

45. Quite apart from the fact that we are concerned with the parliamentary intention in 1969, it is quite wrong to suggest (as the majority in the lower House did) that a “trilogy” of more recent cases have changed the law as it has long been understood to be. The traditional understanding was reaffirmed in the House of Lords by Lord Diplock in Lonrho Ltd v Shell Petroleum Co Ltd (No 2), p.185. It was reaffirmed yet again in the House of Lords by Lord Browne-Wilkinson in X (Minors) v Bedfordshire County Council, p.732 one of the “trilogy”. The other two are R v Deputy Governor of Parkhurst Prison, ex parte Hague and Morrison Sports Ltd v Scottish Power UK plc. In none of the three is there any suggestion that the approach of the courts to deciding whether the breach of a statutory duty gives rise to civil liability in damages has changed. In X v Bedfordshire, the principles applicable were said to be “well-established”, albeit difficult to apply (p.731).

46. Those difficulties arise in novel situations rather than in well-established situations like this. In X v Bedfordshire, Lord Browne-Wilkinson stressed that in no previous case, “had [it] been held that statutory provisions establishing a regulatory system or a scheme of social welfare for the benefit of the public at large” gave rise to a right of action for damages (p.731). Although individuals might in fact be protected, the legislation was for the benefit of society in general and not just a particular class. The cases where civil liability had been imposed were very limited and specific “as opposed to general administrative functions imposed on public bodies and involving the exercise of administrative discretions” (p.732). Cutler, being concerned with the regulation of betting at dog races, was an example of such a scheme, which did not give rise to civil liability. Hague, being concerned with the management of prisons, was another.

47. Something more should be said about Morrisons Sports, as it is a recent decision of this court, to which I was a party. It was concerned with whether there was civil liability for breach of the Electricity Supply Regulations, made in 1988 but to be treated as if made under the power in s.29 of the Electricity Act 1989. Section 29(3) provided that the Regulations might impose criminal penalties for their contravention; but it also provided that “nothing in this subsection shall affect any liability of any such person to pay compensation in respect of any damage or injury which may have been caused by the contravention”. Much of the judgment is devoted to explaining why the view of the Inner House that this wording was apt to impose civil liability, as opposed to acknowledging it if it existed, was untenable. When Lord Rodger (with whom the other members of the court agreed) turned to whether the regulations did indeed impose civil liability for breach, he cited the above passage from the speech of Lord Browne Wilkinson in X v Bedfordshire, which referred to, and cast no doubt upon, the law on employers’ liability as decided in Groves v Lord Wimborne. There is no suggestion in Morrisons Sports that that is no longer the law. The judgment goes on to look at the overall legislative scheme for regulating the supply of electricity. While this clearly contemplated that there might be civil liability, it did not expressly provide for it. “Looked at as a whole . . . the scheme of the legislation, with its carefully worked-out provisions for various forms of enforcement on behalf of the public, points

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against individuals having a private right of action for damages. . . .� (para.37).

It was also difficult to identify any limited class of the public for whose protection the Regulations were intended (para.38). In short, this was a general regulatory scheme intended for the benefit of the whole population.

48. The difference between that case and this could hardly be greater. This is a very specific statutory duty imposed upon employers, and also imposed upon specified officers where the employer is a limited company. There can be no difference in substance between imposing criminal liability for failing to do something and imposing a duty to do it. The purpose was to protect a very specific class of people, namely employees who might be injured by the employer’s breach of duty (whether arising by statute or at common law). The protection intended was that they should be compensated for their injuries even if, for whatever reason, the employer was unable to do so. Failure to insure means that the employee is denied the very thing that the legislation is intended to provide for him.

49. For these reasons, as well as for the fuller reasons given by Lord Toulson, I would allow this appeal and let the case go to proof.

For the appellant: Andrew Smith QC, Craig Murray, instructed by Lefevre Litigation, Solicitors, Edinburgh.

For the respondent: Roddy Dunlop QC, Richardson, Pugh, instructed by Harper Macleod LLP, Solicitors, Edinburgh.

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A SUPREME COURT

28 July 2016

Lady Hale (Deputy President), Lord Wilson, Lord Reed, Lord Hughes and Lord Hodge THE CHRISTIAN INSTITUTE AND OTHERS B

against LORD ADVOCATE

C

Appellants Respondent

Human rights—Devolution issue—Legislative competence—Named person—Reserved matters—Data protection—Processing of personal data—Directive 95/46/EC—Whether provisions of Pt 4 of the Children and Young People (Scotland) Act 2014 lie within legislative competence of Scottish Parliament—Children and Young People (Scotland) Act 2014 (asp 8) Human rights—Right to respect for private and family life—Named person—Whether breach of parent’s family life unless parents have consented to appointment—Whether interference in accordance with law—Whether interference proportionate—European Convention on Human Rights, art.8

D

E

F

G

The Scottish Government proposed to introduce a new professional role, that of named person, to address concerns that there was no commonly agreed process for routine information sharing about concerns about wellbeing of young persons. They introduced the Children and Young People (Scotland) Bill, which was duly passed by the Scottish Parliament. The Act aimed to ensure that every child in Scotland had a named person and provided for a wide-ranging duty on all relevant public authorities to cooperate with the named person in the conduct of their duties, which would involve information sharing among various relevant public authorities. The Act contains provision for the sharing of information which was “likely to benefit the wellbeing of the child or young person” and imposed a duty to disclose information and confirmed power to do so where the information was likely to be relevant to the exercise of named functions in relation to the child or young person. It also provided a duty to provide information which was likely to be relevant to the exercise of any function of the service provider or relevant authority which affected or may affect the wellbeing of the child or young person. There was also power to provide any information if the information holder considered that its provision to the service provider or relevant authority was necessary or expedient for the purpose of the exercise of the named person functions. The powers and duties include a range of information to be shared which depends upon the exercise of judgement by the information holder and was potentially very wide. Eight factors were listed which were important in relation to guidance as to what was meant by wellbeing; these are that the child or young person would be “safe, healthy, achieving, nurtured, active, respected, responsible, and included”. Statutory guidance was issued about the exercise of functions under the Act. The appellants were four registered charities with an interest in family matters and three individual parents who challenged the lawfulness of the data sharing and retention provisions in the Act on the ground that they related to reserved matters with the consequence that s.29(2)(b) of the Scotland Act

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1998 applied. The Inner House held that the “pith and substance” of the 2014 Act was child protection rather than relating to data protection and did not refer to reserved matters. The appellants also challenged the compulsory appointment of a named person as a breach of the rights of the parents of children under art.8 of the ECHR, first, on the broad basis that the compulsory appointment of a named person to a child, involved a breach of the parents’ art.8 rights unless the parents had consented to the appointment or the appointment was necessary to protect the child from significant harm; and secondly, the narrower challenge focused on the provisions in ss.26 and 27 for the sharing of information about a child concentrating on European Union law.

The intervener, Community Law Advice Network, challenged only the information-sharing provisions.

The challenges raised four separate questions, namely: (1) what were the interests which art.8 of ECHR protected; (2) whether and in what respects the operation of the Act interfered with the art.8 rights of parents or of children and young people; (3) whether that interference was in accordance with the law; and (4) whether that interference was proportionate, having regard to the legitimate aim pursued.

Held (1) that whether a provision “related to” a reserved matter was determined by reference to the purpose of the provision in question, which was to be ascertained, having regard to the effect of the provision among other relevant matters, including the question as to whether a single predominant purpose had been identified, or whether the provision would relate to a reserved matter provided one purpose which could have been properly attributed to it justified that conclusion and the fact that the provision in question had two or more purposes, one of which related to a reserved matter meant that the provision was outside competence unless the purpose could have been regarded as consequential and of no real significance when regard was had to what the provision overall sought to achieve and that approach should not be confused with the “pith and substance” test developed to resolve problems in a number of federal systems (paras 30, 31); (2) that the provisions of Pt 4 did not relate to the subject-matter of the Data Protection Act 1998 and the Directive (para.66); (3) that the operation of the information-sharing provisions of Pt 4 (in particular, ss.23, 26 and 27), would result in interferences with rights protected by art.8 of the ECHR (para.78); (4) that the information sharing provisions of Pt 4 of the Act and the revised draft statutory guidance (RDSG), as drafted, did not meet the art.8 criterion of being “in accordance with the law” (para.85); (5) that there was a risk that, in an individual case, parents would be given the impression that they had to accept the advice or services which they were offered, especially in pursuance of a child’s plan for targeted intervention under Pt 5; and further that their failure to cooperate with such a plan would be taken to be evidence of a risk of harm and an assertion of such compulsion, whether express or implied, and an assessment of non-cooperation as evidence of such a risk could well amount to an interference with the right to respect for family life which would require justification under art.8(2) and care should therefore be taken to emphasise the voluntary nature of the advice, information, support and help which were offered under s.19(5)(a)(i) and (ii) and the Guidance should make that clear (para.95); (6) that in order to reduce the risk of disproportionate interferences there was a need for guidance to the information holder on the assessment of proportionality when considering whether information should be provided, and in particular, there was a need for guidance on: (a) the circumstances in which consent should be obtained; (b) those in which such consent could be dispensed with; and (c) whether, if consent wass not to be obtained, the affected parties should be informed of the disclosure either before or after it

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had occurred and, further, if the guidance was to operate as “law” for the purposes of art.8, the information holder should be required to do more than merely have regard to it (para.101); and (7) that the information-sharing provisions of Pt 4 of the Act were not within the legislative competence of the Scottish Parliament (para.106); and appeal allowed and parties invited produce written submissions on the terms of a s.102 order.

Cases referred to:

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Agricultural Sector (Wales) Bill, In re [2014] UKSC 43; [2014] 1 W.L.R. 2622 Bank Mallat v HM Treasury (No 2) [2013] UKSC 39; [2014] A.C. 700; [2013] 3 W.L.R. 179; [2013] 4 All E.R. 533 Bodil Lindquist (Case C-101/01); [2003] ECR I–12971 Campbell v MGN Ltd [2004] UKHL 22; [2004] 2 A.C. 457; [2004] 2 W.L.R. 1232; [2004] 2 All E.R. 995 EL-AL Israeli Airlines Ltd v Danielowitz [1992- 4] Isr. L.R. 478 Gillan v United Kingdom [2009] ECHR 755; (2010) 50 E.H.R.R. 1105 Google Spain SL v Agiencia Espanola de Proteeccion de Datos (Case C- 131/12); [2014] Q.B. 1022; [2014] 3 W.L.R. 659; [2014] 2 All E.R. (Comm) 301 Huang v Secretary of State for the Home Department [2007] UK HL 11; [2007] 2 A.C. 167 [2007] 2 W.L.R. 581; [2007] 4 All E.R. 15 I v Finland [2008] ECHR 623; (2009) 48 E.H.R.R. 740 Imperial Tobacco Ltd v Lord Advocate [2012] UKSC 61; 2013 S.C. (U.K.S.C.) 153 Martin v Most [2010] UKSC 10; 2010 S.C.C.R. 401; 2010 S.C. (U.K.S.C.) 40; 2010 S.L.T. 412 MM v United Kingdom (Application No. 24,029/07) MS v Sweden [1997] ECHR 49; (1997) 28 E.H.R.R. 313 Neulinger and Shuruck v Switzerland [2010] ECHR 1053; (2012) 54 E.H.R.R. 31 Nielsen v Denmark [1988] ECHR 23; (1988) 11 E.H.R.R. 175 Olsson v Sweden (No 1) [1988] ECHR 2; (1988) 11 E.H.R.R. 259 Peruzzo v Germany [2013] ECHR 743; (2013) 57 E.H.R.R. S.E. 17 Pierce v Society of Sisters, 168 US 510 (1925) R (Aguilar Quila) v Secretary of State for the Home Department [2011] UKSC 45; [2012] 1 A.C. 621; [2011] 3 W.L.R. 836; [2012] 1 All E.R. 1011 R (Bibi) v Secretary of State for the Home Department [2015] UKSC 68; [2015] 1 W.L.R. 5055; [2016] 2 All E.R. 193 R (Roberts) v Commissioner of Police of the Metropolis [2015] UKSC 79; [2016] 1 W.L.R. 210 [2016] 2 All E.R. 1005 R (T) v Chief Constable of Greater Manchester Police [2014] UKSC 35; [2015] A.C. 49; [2014] 3 W.L.R. 96; [2014] 4 All E.R. 159 Salvesen v Riddell [2013] UKSC 22; (S.C.) 2014 S.C.L.R. 442013 S.C. (U.K.S.C.) 236; 2013 S.L.T. 863 Schrems v Data Protection Commissioner (Case C-362/14); [2016] Q.B. 527 Silver v United Kingdom [1983] ECHR 11; (1983) 5 E.H.R.R. 347 South Lanarkshire Council v Scottish Information Commissioner [2013] UKSC 55; 2014 S.C. (U.K.S.C.) 1; 2013 S.L.T. 799 Sunday Times v United Kingdom [1979] ECHR 1; (1979) 2 E.H.R.R. 245 Volker and Marcus Schecke GbR and Hartmut Eifert v Land Hessen (Case C-92/09 and C-93/09); [2010] ECR I – 11,063 X v Commission [1994] ECR I-4347 Z v Finland [1997] ECHR 10; (1998) 25 E.H.R.R. 371.

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The full circumstances of the case and the arguments of counsel are to be found in the following judgment of the court which was given by Lady Hale, Lord Reed and Lord Hodge with whom Lord Wilson and Lord Hughes agreed.

A

LADY HALE, LORD REED AND LORD HODGE The background to Pt 4 of the 2014 Act

1. This appeal concerns the question whether the provisions of Pt 4 of the Children and Young People (Scotland) Act 2014 lie within the legislative competence of the Scottish Parliament. Before considering the issues that arise (summarised in para.26 below), it is helpful to begin with an account of the background to the legislation. A suitable starting-point is the consultation paper, “A Scotland for Children”, published by the Scottish Government in July 2012. In general terms, two ideas underlay many of the proposals. The first was a shift away from intervention by public authorities after a risk to children’s and young people’s welfare had been identified, to an emphasis on early intervention to promote their wellbeing, understood as including all the factors that could affect their development. The second was a shift away from a legal structure under which the duties of statutory bodies to cooperate with one another (under, for example, s.13 of the National Health Service (Scotland) Act 1978 and s.21 of the Children (Scotland) Act 1995) were linked to the performance of their individual functions, to ensuring that they work collaboratively and share relevant information so that “all relevant public services can support the whole wellbeing of children and young people” (para.73). In that regard, the consultation paper stated that it was “essential that information is shared not only in response to a crisis or serious occurrence but, in many cases, information should be shared about relevant changes in a child’s and young person’s life”. There was, however, “no commonly agreed process for routine information sharing about concerns about wellbeing” (para.110). The establishment of a new professional role, that of named person, was proposed in order to address those concerns (para.111).

2. On its introduction in April 2013, the Children and Young People (Scotland) Bill was accompanied by a Policy Memorandum which was similar in content to the consultation paper. It stated, in relation to named persons: “They can monitor what children and young people need, within the context of their professional responsibilities, link with the relevant services that can help them, and be a single point of contact for services that children and families can use, if they wish. The named person is in a position to intervene early to prevent difficulties escalating. The role offers a way for children and young people to make sense of a complicated service environment as well as a way to prevent any problems or challenges they are facing in their lives remaining unaddressed due to professional service boundaries.” (para.68) The Bill aimed to ensure that every child in Scotland had a named person (para.70). It provided for a wide-ranging duty on all relevant public authorities to cooperate with the named person in the conduct of their duties. This would be of particular importance in the area of information sharing, since the “role of the named person will depend on the successful sharing of information between relevant public authorities” (para.73).

3. The memorandum explained that concern had been expressed about the existing legal framework for information sharing. This was felt to be confusing and potentially insufficient to enable the role of the named person to operate

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as well as anticipated. In particular, there were concerns regarding sharing information about children where consent was not given (para.75). The memorandum continued: “Currently, information about a child may be shared where the child is at a significant risk of harm. However, the role of the named person is based on the idea that information on less critical concerns about a child’s wellbeing must be shared if a full picture of their wellbeing is to be put together and if action is to be taken to prevent these concerns developing into more serious issues. Without the necessary power to share that kind of information, the named person will not be able to act as effectively as is intended . . . Specific provisions in the Bill, therefore, set out arrangements on information sharing, to give professionals and named persons the power to share information about those concerns” (paras 76–77).

4. It appears, therefore, that one of the principal purposes of Pt 4, as envisaged at that stage, was to alter the existing law in relation to the sharing of information about children and young people, so as to enable information about concerns about their wellbeing, held by individual bodies, to be pooled in the hands of named persons and shared with other bodies, with the ultimate aim of promoting their wellbeing.

The provisions of Pt 4

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5. Part 4 of the Act begins with s.19, which defines a “named person service” as the service of making available, in relation to a child or young person, an identified individual who is to exercise the functions listed in subs.(5): “(a) . . . doing such of the following where the named person considers it to be appropriate in order to promote, support or safeguard the wellbeing of the child or young person— (i) advising, informing or supporting the child or young person, or a parent of the child or young person, (ii) helping the child or young person, or a parent of the child or young person, to access a service or support, or (iii) discussing, or raising, a matter about the child or young person with a service provider or relevant authority, and (b) such other functions as are specified by this Act or any other enactment as being functions of a named person in relation to a child or young person.”

In relation to s.19(5)(a)(iii), the expression “service provider” is defined by s.32 as meaning, in a context of this kind, each health board, local authority, directing authority, and the Scottish Ministers. The expression “directing authority” is defined by s.32 as meaning the managers of each grant-aided school, the proprietor of each independent school, and the local authority or other person who manages each residential establishment which comprises secure accommodation. The expression “relevant authorities” is defined by s.

31 and Sched.2 as including a wide variety of public bodies, including NHS 24, NHS National Services Scotland, the Scottish Ambulance Service Board, the Scottish Sports Council, the Scottish Police Authority, and the Scottish Fire and Rescue Service.

6. Under ss.20 and 21, responsibility for the provision of a named person service lies with health boards in relation to all pre-school children residing within their area, and generally with local authorities in relation to all other children residing within their area. There are exceptions in relation to pupils at independent and grant-aided schools, where responsibility lies with the directing authority; children kept in secure accommodation, where

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responsibility lies with the directing authority; children kept in custody, where responsibility lies with the Ministers; and children (as defined) who are members of the armed forces. Under s.22, named person services must also be provided in relation to all young people over 18 who remain at school.

Responsibility for making provision for them in that situation lies with the local authority, except in relation to young people at independent or grantaided schools, where responsibility lies with the directing authority.

7. Section 23 deals with the communication of information following a change in the identity of the service provider in relation to a child or young person (defined by s.32, in this context, as meaning the person whose function it is to make arrangements for the provision of a named person service in relation to the child or young person). That will occur, for example, when a child first goes to school, and the service provider ceases to be the health board and becomes the local authority or directing authority, or when a child goes from a local authority school to an independent or grant-aided school, and the service provider ceases to be the local authority and becomes the directing authority of the school. In terms of s.23(2)(b), the outgoing service provider must provide the incoming service provider with: “(i) the name and address of the child or young person and each parent of the child or young person (so far as the outgoing service provider has that information), and (ii) all information which the outgoing service provider holds which falls within subs.(3)”.

Information falls within s.23(3) if the outgoing service provider considers that: “(a) it is likely to be relevant to— (i) the exercise by the incoming service provider of any functions of a service provider under this Part, or (ii) the future exercise of the named person functions in relation to the child or young person, (b) it ought to be provided for that purpose, and (c) its provision would not prejudice the conduct of a criminal investigation or the prosecution of any offence”.

8. In considering for the purpose of s.23(3)(b) whether information ought to be provided, the outgoing service provider is, so far as reasonably practicable, to ascertain and have regard to the views of the child or young person, taking account of the child’s age and maturity: s.23(4) and (5). In terms of s.23(6), the outgoing service provider may decide for the purpose of s.23(3)(b) that information ought to be provided only if the likely benefit to the wellbeing of the child or young person outweighs any likely adverse effect on that wellbeing.

Section 23(7) provides: “Other than in relation to a duty of confidentiality, this section does not permit or require the provision of information in breach of a prohibition or restriction on the disclosure of information arising by virtue of an enactment or rule of law.”

9. Section 24 imposes on service providers a duty to publish information about the operation of the named person service, and to provide children and young people and their parents with information about the arrangements for contacting named persons. Section 25 imposes on service providers and relevant authorities a duty to help in the exercise of named person functions.

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10. Section 26 is concerned with the sharing of information, and is expressed in similar language to s.23. It imposes two duties to disclose information, and also confers a power. First, under s.26(1), a service provider or relevant authority (or any person exercising a function on their behalf, such as an independent contractor: s.26(10)) must provide to the service provider in relation to a child or young person any information which falls within subs.

(2). Information falls within s.26(2) if the information holder considers that: “(a) it is likely to be relevant to the exercise of the named person functions in relation to the child or young person, (b) it ought to be provided for that purpose, and (c) its provision to the service provider in relation to the child or young person would not prejudice the conduct of any criminal investigation or the prosecution of any offence.”

11. Secondly, under s.26(3) the service provider in relation to a child or young person must provide to a service provider or relevant authority (or any person exercising a function on their behalf) any information which falls within subs.

(4). Information falls within s.26(4) if the information holder considers that: “(a) it is likely to be relevant to the exercise of any function of the service provider or relevant authority which affects or may affect the wellbeing of the child or young person, (b) it ought to be provided for that purpose, and (c) its provision to the service provider or relevant authority would not prejudice the conduct of any criminal investigation or the prosecution of any offence.”

F

In considering for the purpose of s.26(2)(b) and the corresponding provision in s.26(4)(b) whether information ought to be provided, the information holder is, so far as reasonably practicable, to ascertain and have regard to the views of the child or young person, taking account of the child’s age and maturity: s.26(5) and (6). In terms of s.26(7), the information holder may decide for the purpose of s.26(2)(b) and (4)(b) that information ought to be provided only if the likely benefit to the wellbeing of the child or young person outweighs any likely adverse effect on that wellbeing.

12. Thirdly, s.26(8) confers an additional power: the service provider in relation to a child or young person may provide to a service provider or relevant authority any information which falls within subs.(9). Information falls within s.26(9) if the information holder considers that its provision to the service provider or relevant authority is necessary or expedient for the purpose of the exercise of any of the named person functions.

13. Finally, in relation to s.26, subs.(11) provides: “Other than in relation to a duty of confidentiality, this section does not permit or require the provision of information in breach of a prohibition or restriction on the disclosure of information arising by virtue of an enactment or rule of law.”

G

Section 27 makes further provision in relation to the disclosure of information in breach of a duty of confidentiality: where a person by virtue of Pt 4 provides information in breach of such a duty and informs the recipient of that breach, the recipient may not provide the information to another person unless its provision is permitted or required by virtue of any enactment or rule of law.

14. Section 28 imposes a duty on local authorities, health boards, directing authorities and relevant authorities to have regard to guidance issued by the

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Ministers about the exercise of functions conferred by Pt 4. Section 29 imposes a duty on the same bodies to comply with any direction issued by the Ministers.

Section 30 confers on the Ministers a power to make provision about complaints concerning the exercise of functions conferred by or under Pt 4.

15. These provisions confirm that one of the central purposes of Pt 4 is to establish new legal powers and duties, and new administrative arrangements, in relation to the sharing of information about children and young people, so as to create a focal point, in the form of named persons, for the pooling and sharing of such information, and the initiation of action to promote their wellbeing.

16. The terms in which ss.23 and 26 define the information which is subject to those powers and duties indicate an intention that the range of information to be shared will depend on the exercise of judgement by the information holder, and is potentially very wide. That is consistent with the emphasis in the consultation paper on collaborative working and routine information sharing.

Thus, under ss.23(3) and 26(2), the duty to share information does not depend on whether it is objectively relevant or necessary that it should be shared, but on whether the information holder considers that the information is likely to be relevant to the exercise of the named person functions (or, as the case may be, the functions of a service provider under Pt 4): functions which are defined by s.19(5) by reference to what the named person considers to be appropriate in order to promote, support or safeguard wellbeing. Section 26(4)(a) is equally wide: the duty again applies to information which the information holder considers is likely to be relevant to the exercise of a function, and in addition the function need not be one which actually affects the wellbeing of a child or young person, but merely one which the information holder considers may affect their wellbeing. Section 26(9) is wider still: the power of disclosure conferred by s.26(8) can be exercised in relation to information whose disclosure the information holder considers to be necessary or expedient for the purpose of the exercise of any of the named person functions. “Wellbeing” is not defined. The only guidance as to its meaning is provided by s.96(2), which lists eight factors to which regard is to be had when assessing wellbeing. The factors, which are known under the acronym SHANARRI, are that the child or young person is or would be: “safe, healthy, achieving, nurtured, active, respected, responsible, and included”. These factors are not themselves defined, and in some cases are notably vague: for example, that the child or young person is “achieving” and “included”.

17. The identification of a wellbeing need does not of itself give rise to compulsory measures. Pt 5 of the Act introduces the “child’s plan” and “targeted interventions”. Section 33(2) defines “wellbeing need” broadly: a child has a wellbeing need “if the child’s wellbeing is being, or is at risk of being, adversely affected by any matter”. Where the responsible authority considers that a child has a wellbeing need and that that need cannot be met, or met fully, without a targeted intervention which is capable of meeting the need to some extent, it is to prepare a child’s plan for a targeted intervention or interventions. A targeted intervention is the provision of services for the child to meet needs which are not capable of being fully met by the general services to children which the relevant authority provides (s.33(4)). The child’s plan identifies the relevant authority which is to provide the service, the manner in which it is to be provided and the outcome which the targeted intervention is intended to achieve (s.34(1)). This does not involve any compulsion. Further, in deciding whether a child requires a child’s plan the responsible authority is required to consult the named person and, so far as

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reasonably practicable, to ascertain and have regard to the views of the child and the child’s parents, among others (s.33(6)).

The Scottish Government’s revised draft statutory guidance

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18. Section 28(1) of the Act provides that a local authority, a health board, a directing authority and a relevant authority must have regard to guidance issued by the Scottish Ministers about the exercise of functions under Pt 4.

The Scottish Government in performance of its duty under s.96(3) published revised draft statutory guidance (“RDSG”) in December 2015. The RDSG is aimed at the strategic leaders and operational managers of health boards, local authorities, directing authorities and relevant authorities, which are responsible for operating Pts.4, 5 and 18 of the Act. It provides that the organisations must have regard to the guidance in carrying out those functions (para.1.2.2). It states (para.1.2.5) that separate practice materials will be made available for practitioners. It records the success of the pathfinder project set up in the Highland council area in 2006, which achieved the better coordination of assessment and planning in support of children’s needs by establishing common procedures and processes for sharing concerns about a child (para.1.3.3). It states: “The pathfinder brought significant improvements to children and young people and their families, reducing the need for statutory intervention in children’s and families’ lives by resolving potential problems at an earlier stage.” The improvements included greater clarity about whom families should go to when they needed help, falls in the number of referrals to the Children’s Reporter, a reduced number of children placed on the Child Protection Register, and the focusing of resources on the children who needed most support (para.1.3.3). It records that the approach had been adopted to varying degrees across Scotland (para.1.3.4).

19. The RDSG provides a useful insight into the context in which the named person is expected to operate. It explains that “wellbeing is multidimensional” (para.2.3.4) and that wellbeing is “a broader, more holistic concept” than welfare (para.2.3.5). It advises on the relationship between child protection and wellbeing in these terms at para.2.3.6: “[C]hild protection is not something which sits separately from wellbeing.

Indeed a series of low level indicators of wellbeing need (whether obviously related or not) taken together can amount to a child protection issue. Child protection requires taking prompt action to safeguard a child where an assessment indicates that the child may be at risk of significant harm. The child’s wider wellbeing should also be assessed to ensure their current and future holistic needs are considered.”

In para.2.4.2, it gives guidance on the interpretation of the eight wellbeing indicators in s.96(2) as follows: “Safe—protected from abuse, neglect or harm at home, at school and in the community.

Healthy—having the highest attainable standards of physical and mental health, access to suitable healthcare, and support in learning to make healthy, safe choices.

Achieving—being supported and guided in learning and in the development of skills, confidence and self-esteem, at home, in school and in the community.

Nurtured—having a nurturing place to live in a family setting, with additional help if needed, or, where this is not possible, in a suitable care setting.

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Active—having opportunities to take part in activities such as play, recreation and sport, which contribute to healthy growth and development, at home, in school and in the community.

Respected—having the opportunity, along with carers, to be heard and involved in decisions that affect them.

Responsible—having opportunities and encouragement to play active and responsible roles at home, in school and in the community, and where necessary, having appropriate guidance and supervision, and being involved in decisions that affect them.

Included—having help to overcome social, educational, physical and economic inequalities, and being accepted as part of the community in which they live and learn.”

20. The RDSG observes (at para.2.5.4) that the views of the child, young person or parents may differ from the practitioner’s view of wellbeing needs and states that “a holistic assessment should take account of all views”. It recognises that children can thrive in different environments and counsels respect for their and their parents’ culture and beliefs (para.2.5.5). It advises that a referral to the Children’s Reporter should be made where the wellbeing assessment reveals that a child needs protection, guidance, treatment or control and that a compulsory supervision order might be needed (para.2.5.6).

It continues (at para.2.5.7): “Early intervention and a compulsory supervision order are not mutually exclusive in promoting, supporting and safeguarding the wellbeing of a child or young person. The use of compulsion at an early stage may help to ensure compliance with interventions, and prevent wellbeing needs escalating. Parental capacity and willingness to change should be considered in order to assess whether the child’s wellbeing needs are likely to be met by voluntary support or whether a compulsory supervision order might be necessary.”

21. A named person, on becoming aware of a wellbeing need, should use professional judgement in deciding how to respond. “Seeking and considering the views of the child and parent should be a key part of the process unless doing this is likely to be detrimental to the child’s wellbeing” (para.4.1.28).

22. The RDSG also gives guidance on the information-sharing duties contained in ss.23, 26 and 27 of the Act. It records (para.10.1.2) that Pt 4 of the Act does not change the type of information being shared and received by service providers and relevant authorities but expresses the view that the Act will increase consistency in practice which in turn is likely to mean that more information will be shared. It advises that the Information Commissioner’s Office (ICO) Guide to Data Protection and its Data Sharing Code of Practice should be used to support the governance of data sharing (para.10.1.4). On art.8 of the European Convention on Human Rights (“ECHR”) it states (para.10.3.1): “The right to privacy in art.8 is a qualified rather than an absolute right.

Public authorities can share information if it is lawful and proportionate to do so, but each case must be considered carefully to assess what is lawful and proportionate in the particular circumstances.”

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and (iii) that the sharing of the information would not prejudice the conduct of a criminal investigation or the prosecution of any offence. In its discussion of the second test (para.10.7.4) it states: “It is routine good practice to seek parents’ views about information shared, unless it would be against the child’s wishes, where they are considered capable of making that decision, or where seeking the views of the parent may be detrimental to the child’s wellbeing.”

It states that “in all but exceptional situations, the child or young person, and, as appropriate, their parents” will be involved in the decision to share information (para.10.10.3) (emphasis added). It does not make the involvement of the parents a requirement in all but exceptional circumstances. It says, without elaborating, that there must be no other legal restrictions (paras 10.7.1 and 10.8.1). It explains the discretionary power of a named person service provider to share information under s.26(8) and (9) in para.10.11: “[W]here the named person service has identified a wellbeing need or has been made aware of a likely wellbeing need they have the opportunity to share information in order to explore options for support or to make enquiries on behalf of the child, young person or parents.”

It states in relation to this discretionary sharing of information (para.10.11.2): “Any information shared must be legal and considered in terms of the principles and boundaries of data protection, human rights and children’s rights”, again without elaboration.

24. It explains s.26(11) in these terms (paras 10.13.2–10.13.4): “This sub-section of the Act permits health professionals and others governed by a professional or common law duty of confidentiality to legally disclose relevant information without the information provider’s consent where disclosure of that information has been considered and meets the tests set out in the relevant sub-sections of section 26.

“Section 26(11) does not permit or require the sharing of information in breach of any other legal restriction such as the [Data Protection Act 1998 (‘DPA’)], the Human Rights Act 1998, an order of the court or a decision by a Children’s Hearing specifying non-disclosure of specific information.

In all but exceptional situations, the child or young person, and—as appropriate—their parents, will be involved in the decision to share information and will be told what information has been shared in breach of a duty of confidentiality.” (emphasis added) 25. Finally, the RDSG’s guidance on s.27 (disclosure of information provided in breach of confidentiality) is as follows (para.10.14.2): “If the person receiving the information believes it is necessary to share all or part of it in order to promote, support or safeguard the child’s wellbeing, then the considerations in s.26 must be applied. This would include taking into account the child’s views and understanding the likely effect of sharing on the child’s wellbeing. Other legal requirements must also be considered, including the DPA and the child’s right to private and family life under art.8 of the ECHR. Decisions to share information in these situations will need to be evidenced, and the rationale recorded” (emphasis added).

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26. Section 29(1) of the Scotland Act 1998 provides that an Act of the Scottish Parliament is not law so far as any provision of the Act is outside its legislative

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competence. In terms of s.29(2), a provision is outside its competence so far as any of the following paragraphs apply. Para.(b) applies where the provision “relates to reserved matters”. We address that challenge in s.I (paras 27–66 below). Paragraph (d) applies where the provision “is incompatible with any of the Convention rights or with EU law.” We address the Convention rights challenge and comment briefly on the EU law challenge in ss.II and III (paras 67–105 below) I. The reserved matters challenge

27. The appellants are four registered charities with an interest in family matters and three individual parents. They challenge the lawfulness of the data-sharing and retention provisions in the Act on the ground that they relate to reserved matters, with the consequence that s.29(2)(b) of the Scotland Act applies.They have focused on ss.26 and 27 of the 2014 Act, but their arguments apply also in relation to s.23(2). In terms of s.29(3) of the Scotland Act, the question whether a provision relates to a reserved matter is to be determined (subject to subs.(4), which has no bearing on the present case) “by reference to the purpose of the provision, having regard (among other things) to its effect in all the circumstances”.

28. Section 30 of the Scotland Act gives effect to Sched.5, in which reserved matters are defined. In particular, para.1 of Pt II of Sched.5 provides that the matters to which the Sections in that Part apply are reserved matters. As was pointed out by Lord Hope in Imperial Tobacco Ltd v Lord Advocate, in a judgment with which the other members of the court agreed, the matters listed have a common theme: “It is that matters in which the United Kingdom as a whole has an interest should continue to be the responsibility of the UK Parliament at Westminster. They include matters which are affected by its treaty obligations and matters that are designed to ensure that there is a single market within the United Kingdom for the free movement of goods and services” (para.29).

Amongst the matters listed in Sched.5 is S.B2: “B2. Data protection The subject-matter of— (a) the Data Protection Act 1998, and (b) Council Directive 95/46/EC (protection of individuals with regard to the processing of personal data and on the free movement of such data).”

Paragraph 5 of Pt III of Sched.5 provides that references in the schedule to the subject-matter of any enactment are to be read as references to the subjectmatter of that enactment as it had effect on the principal appointed day, which was 1 July 1999. It is therefore the version of the DPA which was in force on that date which is relevant.

29. This court has had to apply s.29(2)(b) and (3) on a number of occasions, and the approach to be adopted is now well established. In Martin v Most, para.49, Lord Walker said that the expression “relates to” was “familiar in this sort of context, indicating more than a loose or consequential connection, and the language of s.29(3), referring to a provision’s purpose and effect, reinforces that”.That approach was endorsed by Lord Hope in Imperial Tobacco (para.16).

30.Whether a provision “relates to” a reserved matter, in the sense explained

by Lord Walker, is determined by reference to the purpose of the provision in

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question. That purpose is to be ascertained having regard to the effect of the provision, amongst other relevant matters. As was said in relation to the similar provisions in the Government of Wales Act 2006 in In re Agricultural Sector (Wales) Bill, para.50: “As the section requires the purpose of the provision to be examined it is necessary to look not merely at what can be discerned from an objective consideration of the effect of its terms.”

31. Determining the purpose of a provision may not be an easy matter. For example, must a single predominant purpose be identified, or will the provision relate to a reserved matter provided one purpose which can properly be attributed to it justifies that conclusion? That question was considered, obiter,

by Lord Hope in Imperial Tobacco. The legislation in issue imposed restrictions upon the advertising and sale of tobacco products, and was challenged as relating to reserved matters, namely consumer protection and product safety.

Lord Hope stated: “I do not see this as a case which gives rise to the problem which may need to be dealt with if the provision in question has two or more purposes, one of which relates to a reserved matter. In such a situation the fact that one of its purposes relates to a reserved matter will mean that the provision is outside competence, unless the purpose can be regarded as consequential and thus of no real significance when regard is had to what the provision overall seeks to achieve” (para.43).

32. This approach should not be confused with the “pith and substance” test developed to resolve problems in a number of federal systems, to which the Court of Session referred in the present case. Although in Martin v Most Lord Hope mentioned cases applying that test as forming part of the background to the scheme applied in the Scotland Act, he went on to point out that the phrase did not appear in the Act, and that the rules which had to be applied were those laid down in the Act (para.15). In Imperial Tobacco, Lord Hope emphasised the latter point: “[T]he intention was that it was to the 1998 Act itself, not to decisions as to how the problem was handled in other jurisdictions, that one should look for guidance. So it is to the rules that the 1998 Act lays down that the court must address its attention” (para.13).

So, in the present case, the Second Division’s finding that the pith and substance of the 2014 Act are child protection does not answer the question whether any of its provisions relate to the subject-matter of the DPA and Directive 95/46/EC (“the Directive”).

33. It is necessary only to add that the question whether a provision of an Act of the Scottish Parliament relates to a reserved matter is different from the question whether such a provision modifies the law on reserved matters. The latter question is addressed by s.29(2)(c) of the Scotland Act and Sched.4, para.2.

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34. The Directive was made under art.100a of the EC Treaty, which authorises measures for the harmonisation of national laws with the aim of achieving the internal market. The subject-matter of the Directive is described in general terms in its title: it is a directive “on the protection of individuals with regard to the processing of personal data, and the free movement of such data”. The

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link between these two subjects is explained in the recitals. In particular, rec.7 states that: “the difference in levels of protection of the rights and freedoms of individuals, notably the right to privacy, with regard to the processing of personal data afforded in the member states may . . . constitute an obstacle to the pursuit of a number of economic activities at Community level, distort competition and impede authorities in the discharge of their responsibilities under Community law.”

A

The recital continues by noting that “this difference in levels of protection is due to the existence of a wide variety of national laws, regulations and administrative provisions”. Accordingly, rec.8 states that “in order to remove the obstacles to flows of personal data, the level of protection of the rights and freedoms of individuals with regard to the processing of such data must be equivalent in all member states”. The intended result, as rec.9 states, is that “given the equivalent protection resulting from the approximation of national laws, the Member States will no longer be able to inhibit the free movement between them of personal data on grounds relating to protection of the rights and freedoms of individuals, and in particular the right to privacy”. The scope of application of the Directive is not, however, restricted to situations involving free movement: Bodil Lindquist, paras 40–44.

35. Turning to the substantive articles of the Directive, Ch.I sets out general provisions. In particular, art.1 defines the twofold object of the Directive: “1. In accordance with this Directive, Member States shall protect the fundamental rights and freedoms of natural persons, and in particular their right to privacy with respect to the processing of personal data.

2. Member States shall neither restrict nor prohibit the free flow of personal data between Member States for reasons connected with the protection afforded under para.1.”

B

36. Article 2 defines certain terms, and art.3 describes the scope of the Directive. In terms of art.3(1), it applies to “the processing of personal data wholly or partly by automatic means, and to the processing otherwise than by automatic means of personal data which form part of a filing system or are intended to form part of a filing system.” “Personal data” is defined by art.2(a) as meaning “any information relating to an identified or identifiable natural person (‘data subject’)”. “Processing of personal data” is defined by art.2(b) as meaning “any operation or set of operations which is performed upon personal data, whether or not by automatic means, such as collection, recording, organization, storage, adaptation or alteration, retrieval, consultation, use, disclosure by transmission, dissemination or otherwise making available, alignment or combination, blocking, erasure or destruction”. Article 3(2) lists certain circumstances in which the Directive is not to apply. It has not been argued that any of those circumstances applies in the present case.

37. Chapter II sets out general rules on the lawfulness of the processing of personal data. Article 5 requires Member States, within the limits of the provisions of that chapter, to determine more precisely the conditions under which the processing of personal data is lawful. Article 6 sets out five general principles, somewhat misleadingly described as “principles relating to data quality”, to which Member States must give effect. For example, the second principle is that personal data must be “collected for specified, explicit and legitimate purposes and not further processed in a way incompatible with those purposes”. Article 7 sets out six general conditions, described as “criteria

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for making data processing legitimate”, which Member States must apply to the processing of personal data, so that at least one of the conditions is satisfied.

Article 8 sets out particular rules in relation to the processing of what are described as special categories of data, including data revealing racial or ethnic origins, and data concerning health or sex life. Article 8(1) requires Member States to prohibit the processing of such data. The remaining paragraphs of art.8 then disapply art.8(1) in a number of specified circumstances, to which it will be necessary to return.

38. Articles 10 and 11 require Member States to provide that the data controller must provide the data subject with information about the processing of his personal data. Article 12 requires Member States to guarantee certain rights of data subjects in relation to data controllers. Article 13 permits Member States to adopt legislation restricting the scope of certain of these rights and obligations where specified conditions are met. Article 14 requires Member States to grant the data subject the right to object to the processing of his personal data in certain circumstances. Most of the remaining provisions of Ch.II are concerned with the regulation of data controllers. Chapter III is concerned with judicial remedies, liability, and sanctions. Chapter IV is concerned with the transfer of personal data to third countries. Chapter V is concerned with codes of conduct, and Ch.VI with the establishment of national supervisory authorities and of an EU working party. Finally, Ch.VII is concerned with Community implementing measures.

39. Put shortly, therefore, the Directive was designed to harmonise the laws of the Member States relating to the protection of individuals’ interests in relation to the use of their personal data. Its provisions specify the standards of protection which the laws of the Member States must afford, and the methods by which those standards are to be secured and enforced.

The subject-matter of the DPA

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40. The DPA is the measure implementing the Directive in the UK. One would therefore expect its subject-matter to be the same as that of the Directive, and so it proves. The subject-matter of the DPA is described in general terms in its short title: “the regulation of the processing of information relating to individuals, including the obtaining, holding, use or disclosure of such information”.

41. Part I of the DPA defines some of the critical terms, broadly following the definitions in the Directive. Part I also contains some other fundamental provisions of the DPA. Section 4 imposes on a data controller an obligation to comply with the data protection principles set out in Pt I of Sched.1, to which it will be necessary to return. Section 6 establishes the office of Information Commissioner, known in 1999 (cf, para.28 above) as the Data Protection Commissioner. Part II of the DPA confers various rights on individuals relating to information concerning themselves, including rights to access personal data (s.7), to prevent processing which is likely to cause damage or distress (s.10), and to apply for the rectification or destruction of inaccurate data (s.4). Part III contains provisions relating to the regulation of data controllers by the Commissioner. Part IV makes provision for exemptions from the data protection principles, and from Pts.II and III. Part V concerns enforcement by the Commissioner, and Pt VI contains miscellaneous and general provisions.

42. It is apparent that the DPA is intended to secure equivalent standards of protection of the rights of individuals in relation to the processing of personal data throughout the UK, and equivalent methods of securing and

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enforcing those standards. That is as one would expect, given the aims of the Directive. Accordingly, the DPA applies to data controllers throughout the UK: s.5. It establishes a single regulatory authority for the whole of the UK: s.6. (Somewhat confusingly, a separate Scottish Information Commissioner exercises functions under the Freedom of Information (Scotland) Act 2002, but has no regulatory role in relation to data protection.) The Commissioner is the designated authority in the UK for the purposes of the 1981 Council of Europe Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data, and is also the supervisory authority in the UK for the purposes of the Directive: s.54(1). He is accountable to the UK Parliament, and must lay before it reports and codes of practice: s.52. His accounts are examined by the Comptroller and Auditor General: Sched.5,a.t I, para.10. His power to issue codes of practice is exercisable as directed by the Secretary of State: s.51(3). The powers to make orders, regulations and rules under the DPA are exercisable only by the Secretary of State, and only by means of a statutory instrument approved by the UK Parliament: see, for example, ss.30, 38, 54, 64 and 67. The power to designate codes of practice, for the purpose of exemptions relating to journalism, literature and art, is similarly conferred on the Secretary of State: s.32(3). Appeals under the DPA lie to the First-tier and Upper Tribunals (in 1999, to the Data Protection Tribunal) throughout the UK: s.70(1).

43. The DPA allows scope for derogation from certain of its requirements by enactments either of the UK Parliament or of the Scottish Parliament. An example relevant to the present case, to which it will be necessary to return, is s.35(1), under which personal data are exempt from certain provisions relating to the disclosure of information where the disclosure is required by or under any “enactment”, an expression which is defined by s.70(1) as including any enactment comprised in, or in any instrument made under, an Act of the Scottish Parliament.

44. Put shortly, therefore, the DPA was designed to implement the Directive by establishing standards of protection of individuals’ interests in relation to the use of their personal data, and methods by which those standards are to be secured and enforced, which are equivalent in effect throughout the UK. In particular, it imposes obligations on data controllers in relation to the processing of data, and creates rights on the part of data subjects. It also creates a system for the regulation of data controllers by the Commissioner. It allows scope, however, for derogation from certain of its requirements by legislation which need not be UK-wide in application.

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The effect of Pt 4 of the 2014 Act in relation to the DPA

45. The bodies described in Pt 4 of the 2014 Act as service providers, relevant authorities and directing authorities are currently subject, prior to the entry into force of that Act, to a variety of legal duties in relation to the disclosure of information, including duties imposed by the DPA. In particular, as mentioned earlier, s.4 of that Act imposes on a data controller an obligation to comply with the data protection principles set out in Pt I of Sched.1. Those principles include the following: “1. Personal data shall be processed fairly and lawfully and, in particular, shall not be processed unless— (a) at least one of the conditions in Sched.2 is met, and (b) in the case of sensitive personal data, at least one of the conditions in Sched.3 is also met.

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2. Personal data shall be obtained only for one or more specified and lawful purposes, and shall not be further processed in any manner incompatible with that purpose or those purposes.

3. Personal data shall be adequate, relevant and not excessive in relation to the purpose or purposes for which they are processed.”

Section 2 of the DPA defines “sensitive personal data” as including (amongst other matters) information as to a person’s racial or ethnic origins, his physical or mental health or condition, his sexual life, or the commission or alleged commission by him of any offence.

46. Those principles are supplemented by the provisions of Pt II of Sched.1 to the DPA, which indicate how they are to be interpreted. For example, Pt II contains provisions specifying circumstances in which a data subject is to be provided with information, and the nature of that information, in order for the data to be regarded as having been processed fairly for the purposes of the first principle.

47. In relation to the conditions referred to in the first principle, Sched.2 sets out the following conditions, so far as material to the present case: “1. The data subject has given his consent to the processing. ...

3. The processing is necessary for compliance with any legal obligation to which the data controller is subject, other than an obligation imposed by contract.

4. The processing is necessary in order to protect the vital interests of the data subject.

5. The processing is necessary— ... (b) for the exercise of any functions conferred on any person by or under any enactment . . .

6(1) The processing is necessary for the purposes of legitimate interests pursued by the data controller or by the third party or parties to whom the data are disclosed, except where the processing is unwarranted in any particular case by reason of prejudice to the rights and freedoms or legitimate interests of the data subject.”

48. It follows from those conditions that, prior to the entry into force of the 2014 Act, a data controller in Scotland can disclose information about a child or young person without her consent (assuming, in the case of a statutory body, that the disclosure is otherwise within its powers), if the disclosure is necessary to protect her vital interests (cond.4), a test which requires more than that it is likely to benefit her wellbeing; or if the disclosure is necessary for the exercise of a statutory function (cond.5(b)), but not merely because it considers that the information is likely to be relevant to the exercise of that function. The data controller is also, of course, obliged to comply with the other data protection principles so far as relevant, and with any requirements arising from Pt II of Sched.1. In particular, it is required to comply with the third data protection principle, in terms of which personal data must be relevant (and not merely considered by the data controller to be likely to be relevant) in relation to the purpose or purposes for which they are processed.

49. In relation to sensitive data, Sched.3 sets out the following additional conditions, so far as material: “1. The data subject has given his explicit consent to the processing of the personal data. ...

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3. The processing is necessary— (a) in order to protect the vital interests of the data subject or another person, in a case where— (i) consent cannot be given by or on behalf of the data subject, or (ii) the data controller cannot reasonably be expected to obtain the consent of the data subject, or (b) in order to protect the vital interests of another person, in a case where consent by or on behalf of the data subject has been unreasonably withheld. ...

7. (1) The processing is necessary— ... (b) for the exercise of any functions conferred on any person by or under an enactment. . . .

8.The processing is necessary for medical purposes and is undertaken by— (a) a health professional, or (b) a person who in the circumstances owes a duty of confidentiality which is equivalent to that which would arise if that person were a health professional.”

50. It follows from those conditions that, prior to the entry into force of the 2014 Act, a data controller in Scotland of sensitive data can disclose information about the health or sexual life of a child or young person, without his or her explicit consent (assuming, in the case of a statutory body, that the disclosure is otherwise within its powers), if the disclosure is necessary in order to protect his or her vital interests (and not merely because it is likely to benefit her wellbeing) and, in addition, it is either impossible for him or her to give consent or the data controller cannot reasonably be expected to obtain it (cond.3). The information can also be disclosed if its disclosure is necessary for the exercise of a statutory function (cond.7(1)(b)), but not merely because the data controller considers that the information is likely be relevant to the exercise of that function. It can also be disclosed for medical purposes, but only where a duty of confidentiality is owed (cond.8): a requirement which gives rise to a difficulty (not discussed in this appeal) where disclosure is liable to be made under Pt 4 of the 2014 Act, since ss.23(7) and 26(11) of the 2014 Act override duties of confidentiality. It is in addition necessary to comply with the other data protection principles, and with any requirements arising from Pt II of Sched.1.

51. The effect of Pt 4 of the 2014 Act on the requirements of the DPA is extremely complex. Numerous difficult questions are liable to arise, which were not discussed in detail, if at all, in the present appeal. A sufficient idea of the effect of Pt 4 can, however, be obtained to enable the issue arising in relation to reserved matters to be determined.

52. It may be helpful to explain at the outset that much of the difficulty arises from ss.23(7) and 26(11) of the 2014 Act, in terms of which ss.23 and 26 do not permit or authorise the provision of information in breach of a prohibition or restriction on its disclosure arising by virtue of an enactment or rule of law (other than in relation to a duty of confidentiality). This means that the powers and duties of disclosure set out in ss.23 and 26 cannot be taken at face value. To the extent that their terms may be inconsistent with the requirements of the DPA, they have no effect. The DPA itself, however, contains provisions which confer exemptions from some of its requirements where they are inconsistent with another enactment, or which treat some of its

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requirements as satisfied where disclosure is necessary for compliance with a statutory obligation. In these circumstances, it is necessary for anyone wanting to understand the effect of ss.23 and 26 on the disclosure of information to have the 2014 Act in one hand and the DPA in the other, to determine the priority which their provisions have vis-à-vis one another notwithstanding the logical puzzle created by ss.23(7) and 26(11) of the 2014 Act when read with the DPA, and to try, by cross-reference, to work out their cumulative effect.

53. One potentially significant effect follows from s.35(1) of the DPA, in terms of which personal data are exempt from the non-disclosure provisions where the disclosure is “required” by or under any enactment. A provision of an Act of the Scottish Parliament is an enactment for this purpose: s.70(1).

The non-disclosure provisions are defined by s.27(3) of the DPA as meaning the provisions specified in s.27(4) of that Act, to the extent to which they are inconsistent with the disclosure in question. Those provisions are the first data protection principle, except to the extent to which it requires compliance with the conditions in Scheds.2 and 3, the second, third, fourth and fifth data protection principles, s.10 (the right to prevent processing likely to cause damage or distress) and s.14(1)–(3) (the rectification, blocking, erasure and destruction of data). Sections 23(2), 26(1) and 26(3) of the 2014 Act require the disclosure of personal data, subject to ss.23(7) and 26(11). Accordingly, if those provisions are within devolved competence, and if the logical puzzle as to whether s.35(1) of the DPA prevails over ss.23(7) and 26(11) of the 2014 Act is resolved in favour of s.35(1) (a point which was not the subject of argument in this appeal, but was the implicit basis on which the arguments proceeded), then it follows that disclosure as required by ss.23 and 26 is exempt from the non-disclosure provisions, as defined, to the extent that the non-disclosure provisions are inconsistent with the disclosure.

54. For example, the third data protection principle is inconsistent with the disclosure required by ss.23(2), 26(1) and 26(3) of the 2014 Act, since those provisions require disclosure of information which is considered by the data processor to be “likely to be relevant”, whereas the third principle requires any personal data disclosed to be “relevant”, as well as adequate and not excessive in relation to the purpose or purposes for which they are processed. On the other hand, the fifth principle (that data processed for any purpose or purposes shall not be kept for longer than is necessary for that purpose or those purposes) is not inconsistent with ss.23 and 26 of the 2014 Act, and therefore continues to apply. The duties of disclosure imposed by ss.23 and 26 remain subject to numerous other provisions of the DPA, including the first data protection principle, to the extent to which it requires compliance with the conditions in Scheds.2 and 3. The power conferred by s.26(8) of the 2014 Act, on the other hand, does not “require” disclosure, and therefore cannot benefit from the exemption conferred by s.35(1) of the DPA. 55. The discussion in this appeal focused on only one aspect of the complex inter-relationship between Pt 4 of the 2014 Act and the DPA, namely the question whether disclosure in accordance with the duties imposed by Pt 4 of the 2014 Act would comply with the conditions imposed by Schds.2 and 3 to the DPA. It was argued on behalf of the Ministers that conds.3 and 5(b) in Sched.2, and cond.7(1)(b) in Sched.3, would be met. Condition 3 is satisfied where the processing “is necessary for compliance with any legal obligation to which the data controller is subject, other than an obligation imposed by contract”. Condition 5(b) in Sched.2, and cond.7(1)(b) in Sched.3, are satisfied where the processing “is necessary . . . for the exercise of any functions conferred on any person by or under any [or an] enactment”.

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56. The imposition of a statutory duty of disclosure by ss.23(2), 26(1) and 26(3) of the 2014 Act has the consequence that cond.3 in Sched.2 to the DPA is satisfied. The terms in which that duty is imposed do not, on the other hand, meet the requirements of cond.5(b) in Sched.2 and cond.7(1)(b) in Sched.3.

In each case, the data controller is required by the 2014 Act to disclose personal data to a third party if he “considers” that the data are “likely to be relevant” to the exercise of certain statutory functions by the third party and “ought to be provided for that purpose”. The test imposed by cond.5(b) in Sched.2 and cond.7(1)(b) in Sched.3 to the DPA requires that disclosure must be “necessary” for the exercise of statutory functions (which must again refer to the functions of the person to whom the disclosure is made, given that s.35(1), read with s.27, requires that a data processor who is under a statutory duty to make the disclosure must comply with Scheds.2 and 3: a requirement which would be pointless if it were met ex hypothesi). The meaning of “necessary” was considered by this court in South Lanarkshire Council v Scottish Information Commissioner. As was explained there at paras 25–27, it is an expression whose meaning depends on the context in which it falls to be applied. Where the disclosure of information constitutes an interference with rights protected by art.8 of the ECHR, as in the present context (as explained at paras 75–77 below), the requirement that disclosure is “necessary” forms part of a proportionality test: the disclosure must involve the least interference with the right to respect for private and family life which is required for the achievement of the legitimate aim pursued. Disclosure where the data processor considers that the information is likely to be relevant cannot be regarded as necessary if the legitimate aim could be achieved by something less. It cannot be “necessary”, in that sense, to disclose information merely on the ground that it is objectively relevant, let alone on the ground that a particular body considers that it is likely to be relevant. Relevance is a relatively low threshold: information may be relevant but of little significance. A test of potential relevance fails to recognise the need to weigh the importance of the disclosure in achieving a legitimate aim against the importance of the interference with the individual’s right to respect for her private and family life. That deficiency is not made good by the requirement that the data controller considers that the information ought to be provided. It will be necessary to return to the question of proportionality when we consider the challenge to the legislation under art.8.

57. So far as the power conferred by s.26(8) is concerned, a data controller “may” disclose information to a third party if he “considers” that to do so is “necessary or expedient” for the purpose of the exercise of any of the named person functions. Those conditions are less demanding than any of the conditions in Scheds.2 and 3 to the DPA that are relied on by the Ministers.

Condition 3 in Sched.2 is not satisfied, since the disclosure does not have to be necessary for compliance with any legal obligation imposed on the data controller. Condition 5(b) in Sched.2, and cond.7(1)(b) in Sched.3, are not satisfied, since the processing does not have to be necessary for the exercise of any of the named person functions. Nor is the third data protection principle met, since there is no requirement that the information should be relevant.

58. The first data protection principle is therefore complied with, insofar as the duties of disclosure imposed by Pt 4 of the 2014 Act apply to non-sensitive data, but not insofar as they apply to sensitive data or insofar as Pt 4 confers a power to disclose information rather than imposing a duty. Sections 23(7) and 26(11) therefore apply, with the consequence that the duties imposed by ss.23(2), 26(1) and 26(3) in respect of sensitive data, and the power conferred by s.26(8) in respect of data of all kinds, cannot be taken at face value. Instead,

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the duties imposed by ss.23(2), 26(1) and 26(3) in respect of sensitive data must be understood as being conditional upon compliance with at least one of the conditions in Sched.3 to the DPA, and therefore as being subject to more stringent criteria than those which appear on the face of the 2014 Act. The power conferred by s.26(8) must likewise be understood as being conditional upon compliance with at least one of the conditions in Sched.2 to the DPA, and also, if the information in question is sensitive data, upon compliance with at least one of the conditions in Sched.3. In addition, it is subject to compliance with the requirements arising in relation to the first data protection principle under Pt II of Sched.1 to the DPA, and also to compliance with the other data protection principles and the other duties imposed by the DPA. The effect of Pt 4 of the 2014 Act in relation to the Directive

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59. As explained earlier, the Directive requires Member States to establish a number of principles relating to the processing of data, which find their counterpart in the data protection principles laid down in the DPA. The principles set out in the Directive are complex and raise numerous issues of interpretation, like their UK counterparts. For present purposes, it is sufficient to focus on the provisions corresponding to Scheds.2 and 3 to the DPA. 60. As explained earlier, art.7 sets out six general criteria which Member States must apply to the processing of personal data, so that at least one of the criteria is satisfied. The criteria which the Ministers maintain are satisfied by the terms of Pt 4 of the 2014 Act are the following: “(c) processing is necessary for compliance with a legal obligation to which the controller is subject; or ... (e) processing is necessary for the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller or in a third party to whom the data are disclosed”.

These criteria are almost identical to those set out in conds.3 and 5(b) in Sched.2 to the DPA. For the reasons explained earlier, ss.23(2), 26(1) and 26(3) meet the requirements of criterion (c), but s.26(8) does not meet the requirements of any of the criteria.

61. As explained earlier, art.8(2) permits specified exemptions from the general prohibition imposed by art.8(1) on the processing of personal data revealing racial or ethnic origin, political opinions, religious or philosophical beliefs, trade-union membership, and the processing of data concerning health or sex life. The exemptions, so far as potentially relevant, are as follows: “(a) the data subject has given his explicit consent to the processing of those data, except where the laws of the Member State provide that the prohibition referred to in para.1 may not be lifted by the data subject’s giving his consent; or ... (c) processing is necessary to protect the vital interests of the data subject or of another person where the data subject is physically or legally incapable of giving his consent.”

Article 8(3) disapplies the prohibition in art.8(1) where: “processing of the data is required for the purposes of preventive medicine, medical diagnosis, the provision of care or treatment or the management of health-care services, and where those data are processed by a health professional subject . . . to the obligation of professional secrecy or by another person also subject to an equivalent obligation of secrecy”.

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Article 8(4) of the Directive permits Member States to lay down additional exemptions for reasons of substantial public interest, subject to the provision of suitable safeguards. Any such additional exemptions must be notified to the Commission.

62. Sections 23(2) and 26(1), (3) and (8) of the 2014 Act do not meet the requirements of the exemptions in art.8(2). The provisions of Pt 4 of the 2014 Act have not been notified to the Commission, and it is not suggested that there has been any other relevant notification. Nor has it been argued that the provisions of Pt 4 would meet the other requirements of art.8(4). It follows for this reason also that, applying ss.23(7) and 26(11), ss.23 and 26 cannot be taken at face value. The performance of the powers and duties created by those provisions, in respect of data falling within the scope of art.8, must be understood as being permissible only where either one of the exemptions listed in art.8(2) applies, or the processing falls within the scope of art.8(3).

A

B

Discussion

63. Does it follow, for the purposes of S.B2 of Sched.5 to the Scotland Act, that any of the provisions of Pt 4 of the 2014 Act relate to the subject-matter of the DPA and the Directive? The fact that a provision of an Act of the Scottish Parliament requires or authorises the disclosure of personal data does not in itself mean that the provision is outside legislative competence: as explained earlier, the DPA envisages in s.35(1), read with s.70(1), that the disclosure of personal data may be required by an enactment comprised in an Act of the Scottish Parliament. In view of that provision, the Scotland Act cannot sensibly be interpreted as meaning that an enactment “relates to� the subject-matter of the DPA, and is therefore outside the powers of the Scottish Parliament, merely because it requires or authorises the disclosure of personal data. On the other hand, an enactment does not have to modify the DPA in order to relate to the subject-matter of that Act. That follows from the distinction between s.29(2)(b) and (c) of the Scotland Act. The question whether an enactment relates to the subject-matter of the DPA and the Directive has to be decided by following the approach described in paras 29–31 above.

64. Following that approach, it was argued on behalf of the Ministers that the purpose of Pt 4 is to promote the wellbeing of children and young people, and that the provisions concerning the processing of personal data are merely consequential upon, or incidental to, that purpose. It is true that the ultimate aim of Pt 4 is to promote the wellbeing of children and young people. Its more specific objective is to alter the institutional arrangements, and the legal structure of powers and duties, governing cooperation between the different agencies which deal with children and young people, so that they work collaboratively, with the named person playing a coordinating role. That objective reflects the concern, noted in the background material to the 2014 Act, that a weakness in the existing arrangements was that information was not shared until the stage had been reached where a child or young person was at risk of harm. Pt 4 is designed to address that concern by ensuring that information is shared between the relevant agencies, and acted on where appropriate, before that stage is reached. Accordingly, although Pt 4 contains provisions whose objective is to ensure that information relating to children and young people is shared, that objective is not truly distinct from the overall purpose of promoting their wellbeing, but can be regarded as consequential upon it.

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65. It is also important to bear in mind the central aim of the provisions in the Scotland Act concerning reserved matters, explained at para.28 above: that matters in which the UK as a whole has an interest should continue to be the responsibility of the UK Parliament. As explained at para.44 above, the DPA deals with matters in which the UK as a whole has an interest, because it implements the Directive, in accordance with the UK’s treaty obligations, by establishing standards of protection of individuals’ interests in relation to the use of their personal data, and methods by which those standards are to be secured and enforced, which are equivalent in effect throughout the UK. But it also, in s.35 and elsewhere, leaves scope for derogation from certain of its requirements by the UK Parliament and by the Scottish Parliament. To the extent that Pt 4 of the 2014 Act affects the way in which the data protection regime under the DPA applies to matters falling within its scope, that possibility is contemplated by the DPA itself, in s.35. Part 4 does not detract from the regime established by the DPA and the Directive, even if that is only by reason of the fail-safe provisions of ss.23(7) and 26(11).

66. For these reasons, we are not persuaded that the provisions of Pt 4 relate to the subject-matter of the DPA and the Directive.

II. The human rights challenge

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67. The appellants challenge the compulsory appointment of a named person as a breach of the rights of the parents of children under art.8 of the ECHR. Article 8 provides: “1. Everyone has the right to respect for his private and family life, his home and his correspondence.

2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic wellbeing of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.”

68. The appellants’ challenge proceeds on both a broad basis and a narrower basis. The broad challenge is that the compulsory appointment of a named person to a child involves a breach of the parents’ art.8 rights unless the parents have consented to the appointment or the appointment is necessary to protect the child from significant harm. The narrower challenge focuses on the provisions in ss.26 and 27 for the sharing of information about a child. Before the Inner House, the appellants’ narrower challenge, as recorded by the Lord Justice Clerk, raised art.8 of the ECHR but concentrated on EU law. That was also the appellants’ focus in this court.

69. The intervener, Community Law Advice Network, challenges only the information-sharing provisions, arguing that they impose too low a threshold for the disclosure of confidential information and amount to an infringement of the art.8 rights of children and young people. As a result there was more focus on art.8 of the ECHR in the narrower challenge than there had been in the debates both in the Inner House and before the Lord Ordinary.

70. In our view these challenges raise the following four questions: (i) what are the interests which art.8 of ECHR protects in this context, (ii) whether and in what respects the operation of the Act interferes with the art.8 rights of parents or of children and young people, (iii) whether that interference is in accordance with the law, and (iv) whether that interference is proportionate, having regard to the legitimate aim pursued.

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(i) The interests protected by art.8

A

71. In the context of this legislation, the interests protected by art.8 include both family life and privacy. The relationship between parent and child is an integral part of family life. As the European Court of Human Rights (“ECtHR”) stated in, among others, Olsson v Sweden (No 1), “[t]he mutual enjoyment by parent and child of each other’s company constitutes a fundamental element of family life” (para.59). Family life also encompasses a broad range of parental rights and responsibilities with regard to the care and upbringing of minor children, enabling parents to take important decisions on their behalf, and art.8 protects the rights of parents to exercise such parental authority: Nielsen v Denmark, para.61.

72. As is well known, it is proper to look to international instruments, such as the UN Convention on the Rights of the Child 1989 (“UNCRC”), as aids to the interpretation of the ECHR. The Preamble to the UNCRC states: “[T]he family, as the fundamental group of society and the natural environment for the growth and wellbeing of all its members and particularly children, should be afforded the necessary protection and assistance so that it can fully assume its responsibilities within the community.”

B

Many articles in the UNCRC acknowledge that it is the right and responsibility of parents to bring up their children. Thus art.3(2) requires States Parties, in their actions to protect a child’s wellbeing, to take into account the rights and duties of his or her parents or other individuals legally responsible for him or her; art.5 requires States Parties to respect the responsibilities, rights and duties of parents or, where applicable, other family or community members or others legally responsible for the child to provide appropriate direction and guidance to the child in the exercise of his or her rights under the Convention; art.14(2) makes similar provision in relation to the child’s right to freedom of thought, conscience and religion; art.27(2) emphasises that the parents have the primary responsibility to secure, within their abilities and financial capabilities, the conditions of living necessary for the child’s development; art.18(1) provides that: “States Parties shall use their best efforts to ensure recognition of the principle that both parents have common responsibilities for the upbringing and development of the child. Parents or, as the case may be, legal guardians, have the primary responsibility for the upbringing and development of the child. The best interests of the child will be their basic concern” (emphasis supplied).

Articles 27(3) and 18(2) make it clear that the state’s role is to assist the parents in carrying out their responsibilities, although art.19(1) requires the state also to take appropriate measures to protect the child from all forms of abuse or neglect.

73. This represents the detailed working out, for children, of the principle established in art.16(3) of the Universal Declaration of Human Rights and art.23(1) of the International Covenant on Civil and Political Rights that “the family is the natural and fundamental group unit of society and is entitled to protection by society and the state”. There is an inextricable link between the protection of the family and the protection of fundamental freedoms in liberal democracies. The noble concept in art.1 of the Universal Declaration, that “all human beings are born free and equal in dignity and rights” is premised on difference. If we were all the same, we would not need to guarantee that individual differences should be respected. Justice Barak of the Supreme

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Court of Israel has put it like this (in El-Al Israeli Airlines Ltd v Danielowitz, para.14): “The factual premise is that people are different from one another, ‘no person is completely identical to another’ . . . Every person is a world in himself. Society is based on people who are different from one another.

Only the worst dictatorships try to eradicate these differences.”

Individual differences are the product of the interplay between the individual person and his upbringing and environment. Different upbringings produce different people. The first thing that a totalitarian regime tries to do is to get at the children, to distance them from the subversive, varied influences of their families, and indoctrinate them in their rulers’ view of the world. Within limits, families must be left to bring up their children in their own way. As Justice McReynolds, delivering the Opinion of the Supreme Court of the United States famously put it in Pierce v Society of Sisters, pp.534–535: “The fundamental theory of liberty upon which all governments in this Union repose excludes any general power of the state to standardize its children by forcing them to accept instruction from public teachers only.

The child is not the mere creature of the state; those who nurture him and direct his destiny have the right, coupled with the high duty, to recognize and prepare him for additional obligations.”

74. Thus it is not surprising that the ECtHR, in Neulinger and Shuruk v Switzerland, interpreted art.8 in the context, among other instruments, of the UNCRC and explained the concept of the child’s best interests in this way: “The child’s interest comprises two limbs. On the one hand, it dictates that the child’s ties with its family must be maintained, except in cases where the family has proved particularly unfit. It follows that family ties may only be severed in very exceptional circumstances and that everything must be done to preserve personal relations and, if and when appropriate, to ‘rebuild’ the family (see Gnahoré [v. France, [2000] ECHR 420], cited above, para.59).

On the other hand, it is clearly also in the child’s interest to ensure its development in a sound environment, and a parent cannot be entitled under art.8 to have such measures taken as would harm the child’s health and development (see, among many other authorities, Elsholz v Germany (2002) 34 EHRR 58 at [para.]50, and Maršálek v the Czech Republic, no 8153/04, [2006] ECHR 321, at [para.]71, 4 April 2006)” (para.136).

75. The privacy of a child or young person is also an important interest.

Article 16 of the UNCRC provides: “1. No child shall be subjected to arbitrary or unlawful interference with his or her privacy, family, home or correspondence, nor to unlawful attacks on his or her honour and reputation.

2. The child has the right to the protection of the law against such interference or attacks.”

The concept of “private life” in art.8 covers the disclosure of personal data, such as information about a person’s health, criminal offending, sexual activities or other personal matters. The notion of personal autonomy is an important principle underlying the guarantees of the ECHR. See, for example, Gillan v United Kingdom, para.61.

76. Article 8 protects confidential information as an aspect of human autonomy and dignity: Campbell v MGN Ltd, Lord Hoffmann, paras 50–51,

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Lady Hale, para.134. Thus in Z v Finland, para.95, a case concerning the disclosure by a court of a person’s identity and medical data, the ECtHR stated: “[T]he protection of personal data, not least medical data, is of fundamental importance to a person’s enjoyment of his or her right to respect for private and family life as guaranteed by art.8 of the Convention.

Respecting the confidentiality of health data is a vital principle in the legal systems of all the Contracting Parties to the Convention. It is crucial not only to respect the sense of privacy of a patient but also to preserve his or her confidence in the medical profession and in the health services in general.

“Without such protection, those in need of medical assistance may be deterred from revealing such information of a personal and intimate nature as may be necessary in order to receive appropriate treatment and, even, from seeking such assistance, thereby endangering their own health and, in the case of transmissible diseases, that of the community.

“The domestic law must therefore afford appropriate safeguards to prevent any such communication or disclosure of personal health data as may be inconsistent with the guarantees in art.8 of the Convention” (para.95).

77. More recently, in a case concerning a complaint that a hospital had failed to guarantee the security of a person’s data against unauthorised access, the ECtHR repeated that statement and again confirmed that the processing of information relating to an individual’s private life comes within the scope of art.8 and that personal information relating to a patient “undoubtedly belongs to his or her private life”: I v Finland, paras 35–38. Similarly, the Court of Justice of the European Union in X v Commission has opined (para.17) that the right to respect for private life, embodied in art.8, “includes in particular a person’s right to keep his state of health secret”.

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(ii) Whether Pt 4 of the 2014 Act interferes with art.8 rights

78. The provisions of Pt 4 of the 2014 Act by which the state may intervene in family life and private life engage art.8. But, while art.8 is engaged, not all that may be done under Pt 4 would involve an interference with a person’s art.8 rights. There are elements of the role of the named person which are unlikely, by themselves, to involve any interference with the right of a parent, child or young person to respect for his or her private and family life.Thus, by themselves, the functions in s.19(5)(a)(i) and (ii) of providing advice, information and support and helping the parent, child or young person to access a service or support would not normally constitute an interference with the art.8 rights of either the child or his or her parents. But it is clear from the consultation paper, “A Scotland for Children” and the Policy Memorandum, which we discussed in paras 1–3 above, that the sharing of personal data between relevant public authorities is central to the role of the named person. As we have explained, this may well constitute an interference with the art.8 rights of those to whom the information relates. We are therefore satisfied that the operation of the information-sharing provisions of Pt 4 (in particular, ss.23, 26 and 27) will result in interferences with rights protected by art.8 of the ECHR. The question therefore arises whether such interferences can be justified under art.8(2).

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(iii) In accordance with the law

79. In order to be “in accordance with the law” under art.8(2), the measure must not only have some basis in domestic law—which it has in the provisions

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of the Act of the Scottish Parliament—but also be accessible to the person concerned and foreseeable as to its effects. These qualitative requirements of accessibility and foreseeability have two elements. First, a rule must be formulated with sufficient precision to enable any individual—if need be with appropriate advice—to regulate his or her conduct: Sunday Times v United Kingdom, para.49; Gillan v United Kingdom, para.76. Secondly, it must be sufficiently precise to give legal protection against arbitrariness: “[I]t must afford a measure of legal protection against arbitrary interferences by public authorities with the rights safeguarded by the Convention. In matters affecting fundamental rights it would be contrary to the rule of law . . . for a legal discretion granted to the executive to be expressed in terms of an unfettered power. Consequently, the law must indicate with sufficient clarity the scope of any discretion conferred on the competent authorities and the manner of its exercise. The level of precision required of domestic legislation—which cannot in any case provide for every eventuality—depends to a considerable degree on the content of the instrument in question, the field it is designed to cover and the number and status of those to whom it is addressed” Gillan v United Kingdom, para.77; Peruzzo v Germany, para.35.

80. Recently, in R (T) v Chief Constable of Greater Manchester Police this court has explained that the obligation to give protection against arbitrary interference requires that there must be safeguards which have the effect of enabling the proportionality of the interference to be adequately examined.

This is an issue of the rule of law and is not a matter on which national authorities are given a margin of appreciation.

81. In deciding whether there is sufficient foreseeability to allow a person to regulate his or her conduct and sufficient safeguards against arbitrary interference with fundamental rights, the court can look not only at formal legislation but also at published official guidance and codes of conduct: Silver v United Kingdom, paras 88–90; Gillan v United Kingdom, paras 35, 36 and 78; and M M v United Kingdom. In R (Roberts) v Commissioner of Police of the Metropolis this court took into account as constraints on the power of the police to stop and search not only the limits on that power in s.60 of the Criminal Justice and Public Order Act 1994 and the legal protection provided by both s.6 of the Human Rights Act 1998 and the Equality Act 2010, but also the requirements of the Metropolitan Police’s Standard Operating Procedures.

That statutory document, which was published on the Metropolitan Police’s website, regulated the authorisation of stop and search, the operation and also the individual encounter between a police officer and a member of the public on the street. In relation to the exercise on the street of the stop and search power it not only gave officers detailed instructions, which were designed to ensure their proportionate use of such power, but also required them to explain to the individual who was to be searched the reason for the search, to record that reason in writing and make available to the affected individual a copy of that written record. These provided adequate safeguards to enable the courts to examine the proportionality of any interference with fundamental rights: see the judgment of Lady Hale and Lord Reed at paras 43–48.

82. Thus in assessing whether Pt 4 of the 2014 Act is “in accordance with the law” this court has been invited to take into account not only the terms of the Act but also, proleptically, the RDSG, which we have discussed in paras 18–25 above. As we have stated (in para.18 above), the RDSG is directed to specified public authorities, which under s.28(1) of the Act are required to “have regard to” it. In contrast with, for example, the Metropolitan Police’s

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Standard Operating Procedures which we have mentioned, there is no compulsion to follow the guidance. The RDSG gives very little guidance as to the requirements of the DPA or art.8 of the ECHR but envisages that separate practice materials will be made available to practitioners.

83. As we explained in paras 52–62 above when we discussed the effect of the Act in relation to the DPA and the Directive, the powers and duties of disclosure set out in ss.23 and 26 cannot be taken at face value. In several crucial respects, the scope of the duties and powers to disclose or share information set out on the face of the Act are, in reality, significantly curtailed by the requirements of the DPA and the Directive. To recap: (1) Although s.23(2)(b) purports to impose on the outgoing service provider a duty to provide the incoming service provider with all information which it holds which falls within subs.(3), in reality no such duty exists in relation to sensitive data as defined in the DPA, unless at least one of the conditions set out in Sched.3 to the DPA is satisfied (the conditions set out in s.23(3)–(6) of the 2014 Act not in themselves ensuring their satisfaction).

(2) Although s.26(1) purports to impose on a service provider or relevant authority (or any person exercising a function on their behalf) a duty to provide to the service provider in relation to a child or young person any information which the person holds which falls within subs.(2), in reality no such duty exists in relation to sensitive data as defined in the DPA, unless at least one of the conditions set out in Sched.3 to the DPA is satisfied (the conditions set out in s.26(2) and (5)–(7) of the 2014 Act not in themselves ensuring their satisfaction).

(3) Although s.26(3) purports to impose on the service provider in relation to a child or young person a duty to provide to a service provider or relevant authority (or any person exercising a function on their behalf) any information which the person holds which falls within subs.(4), in reality no such duty exists in relation to sensitive data as defined in the DPA, unless at least one of the conditions set out in Sched.3 to the DPA is satisfied (the conditions set out in s.26(4) and (5)–(7) of the 2014 Act not in themselves ensuring their satisfaction).

(4) Although s.26(8) purports to confer on the service provider in relation to a child or young person the power to provide to a service provider or relevant authority (or any person exercising a function on their behalf) any information which the person holds which falls within subs.(9), in reality no such power can lawfully be exercised unless the requirements of the DPA are satisfied (the condition set out in s.26(9) of the 2014 Act not in itself ensuring their satisfaction). Those requirements include, but are not limited to, compliance with at least one of the conditions in Sched.2 to the DPA, and also, if the information in question is sensitive data, compliance with at least one of the conditions in Sched.3. They also include compliance with the requirements arising in relation to the first data principle under Pt II of Sched.1 to the DPA, and also the other data protection principles and the other duties imposed by the DPA. That is not a comprehensive account of the requirements imposed by the DPA: as explained above, those requirements were not fully discussed at the hearing of the appeal. The relationship between the Act and the DPA is rendered particularly obscure by what we have described as the logical puzzle arising from ss.23(7) and 26(11) when read with s.35(1) of the DPA. It is also

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necessary to ensure that the requirements of arts.7 and 8 of the Directive are met, so far as information falls within its scope. There are thus very serious difficulties in accessing the relevant legal rules when one has to read together and cross refer between Pt 4 of the Act and the DPA and work out the relative priority of their provisions.

84. Of even greater concern is the lack of safeguards which would enable the proportionality of an interference with art.8 rights to be adequately examined. Section 26(5) requires an information holder, when considering whether information ought to be provided in the exercise of the duties in s.26(1) or (3), “so far as reasonably practicable to ascertain and have regard to the views of the child or young person”. But there is no such requirement in relation to a service provider’s discretionary power to share information under s.26(8). There the test is merely that the provision of the information is necessary or expedient for the purposes of the exercise of any of the named person functions. Moreover, there is no statutory requirement, qualified or otherwise, to inform the parents of a child about the sharing of information.

The RDSG[’s] only guidance, speaks of “routine good practice”, and leaves it to the discretion of the information holder whether to involve the parent or parents. It is thus perfectly possible that information, including confidential information concerning a child or young person’s state of health (for example, as to contraception, pregnancy or sexually transmitted disease), could be disclosed under s.26 to a wide range of public authorities without either the child or young person or her parents being aware of the interference with their art.8 rights, and in circumstances in which there was no objectively compelling reason for the failure to ascertain and have regard to their views. While para.10.14.2 of the RDSG advises that a record should be kept of the rationale behind a decision to share information, such a record will not assist a child, young person or parent who is not informed that the information is to be or has been shared.

85. We conclude therefore that the information-sharing provisions of Pt 4 of the Act and the RDSG as currently drafted do not meet the art.8 criterion of being “in accordance with the law”. (iv) Whether the interference is proportionate

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86. The fourth question is whether Pt 4 of the Act, when considered along with s.6 of the Human Rights Act 1998, the DPA and the RDSG, will give rise to interferences with the art.8 rights of children, young persons or parents which are proportionate, having regard to the legitimate aim pursued.

87. In assessing proportionality it is necessary to distinguish between the Act itself and its operation in individual cases. The Act gives the named person three principal functions in s.19(5). As we have said (para.78 above), the first two would not normally constitute an interference with the right to respect for private or family life. The third, which itself involves the sharing of information, may more readily do so. The information-sharing provisions in ss.23, 26 and 27 are, as we have said, limited by the DPA, particularly in relation to the disclosure of sensitive personal data. Separately, the operation of the Act in individual cases will involve the exercise of powers in many different circumstances which may entail more or less serious interferences with private and family life and which may provide stronger or weaker justification for such interference.

88. This court has explained that an ab ante challenge to the validity of legislation on the basis of a lack of proportionality faces a high hurdle: if a legislative provision is capable of being operated in a manner which is compatible with Convention rights in that it will not give rise to an unjustified

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interference with art.8 rights in all or almost all cases, the legislation itself will not be incompatible with Convention rights: R (Bibi) v Secretary of State for the Home Department, Lady Hale, paras 2 and 60, Lord Hodge, para.69. The proportionality challenge in this case does not surmount that hurdle. None the less, it can readily be foreseen that in practice the sharing and exchange of information between public authorities are likely to give rise to disproportionate interferences with art.8 rights, unless the information holder carries out a scrupulous and informed assessment of proportionality.

89. In their submissions, the Ministers treated the promotion of children’s wellbeing as being in itself a legitimate aim under art.8. They relied on international instruments in which the term “wellbeing” is used, although possibly not in quite as wide a sense as in the 2014 Act. For example, art.3(2) of the UNCRC provides: “States Parties undertake to ensure the child such protection and care as is necessary for his or her wellbeing, taking into account the rights and duties of his or her parents, legal guardians, or other individuals legally responsible for him or her, and, to this end, shall take all appropriate legislative and administrative measures.”

Similarly, art.24(1) of the EU Charter of Fundamental Rights (“CFR”) provides: “Children shall have the right to such protection and care as is necessary for their wellbeing. . . .” The promotion of the wellbeing of children and young people is not, however, one of the aims listed in art.8(2) of the ECHR. At the most general level, it can be said to be linked to the economic wellbeing of the country, as the Ministers’ submissions emphasised. The extent to which an individual intervention is likely to promote the achievement of such a general aim is however very limited. Individual interventions may make a greater contribution towards achieving other legitimate aims, such as the prevention of disorder or crime, or the protection of health or morals, depending on the circumstances. However, the more tenuous the link between the objective pursued by the intervention (eg, that a child or young person should be “achieving, nurtured, active, respected, responsible and included”) and the achievement of one of the legitimate aims listed in art.8(2), the more difficult it will be to justify a significant interference with the individual’s private and family life. For example, if (contrary to our view) the 2014 Act as currently enacted had enabled the disclosure of sensitive personal data without the consent of the affected party, the disclosure by health professionals of information that a young person was being prescribed contraceptives or had contracted a sexually transmitted disease would be a major interference with private life which could only be justified on very compelling grounds.

90. It is now the standard approach of this court to address the following four questions when it considers the question of proportionality: (i) whether the objective is sufficiently important to justify the limitation of a protected right; (ii) whether the measure is rationally connected to the objective; (iii) whether a less intrusive measure could have been used without unacceptably compromising the achievement of the objective; and (iv) whether, balancing the severity of the measure’s effects on the rights of the persons to whom it applies against the importance of the objective, to the extent that the measure will contribute to its achievement, the former outweighs the latter (ie, whether the impact of the rights infringement is disproportionate to the likely benefit of the impugned measure).

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See Huang v Secretary of State for the Home Department, para.19, Lord Bingham of Cornhill; R (Aguilar Quila) v Secretary of State for the Home Department, para.45, Lord Wilson; Bank Mellat v HM Treasury (No 2), para.74, Lord Reed; and R (Bibi) v Secretary of State for the Home Department, para.29, Lady Hale.

91. As to the first of those questions, it can be accepted, focusing on the legislation itself rather than on individual cases dealt with under the legislation, that Pt 4 of the 2014 Act pursues legitimate aims. The public interest in the flourishing of children is obvious. The aim of the Act, which is unquestionably legitimate and benign, is the promotion and safeguarding of the wellbeing of children and young persons. As the Dean of Faculty submitted, the policy of promoting better outcomes for individual children and families is not inconsistent with the primary responsibility of parents to promote the wellbeing of their children. Improving access to, and the coordination of, public services which can assist the promotion of a child’s wellbeing are legitimate objectives which are sufficiently important to justify some limitation on the right to respect for private and family life.

92. Secondly, Pt 4 of the Act is rationally connected to the legitimate aims pursued. As the Scottish Government’s consultation paper, “A Scotland for Children” showed, the aims of the legislation are to move public bodies with responsibility for children towards early intervention to promote children’s wellbeing rather than only responding to a serious occurrence and to ensure that those public bodies collaborated and shared relevant information concerning the wellbeing of individual children. As the Second Division stated (para.63), the named person is at the heart of the Scottish Government’s proposals. That person is tasked with advising on the wellbeing of a child, helping a child or parent to access a service or support, and being the single point of contact for public services in relation to the child in order to promote, support or safeguard the child’s wellbeing.

93. The third question (whether a less intrusive measure could have been used) does not involve a court in identifying the alternative legislative measure which was least intrusive.The court allows the legislature a margin of discretion and asks whether the limitation on the fundamental right is one which it was reasonable for the legislature to impose: Bank Mellat v HM Treasury (No 2), para.75. If, as the appellants submitted in their broader challenge, a named person should be appointed in relation to a child only if the parents consented or, absent such consent, if the appointment was necessary to protect the welfare of a child who was at risk of harm, the scope for early intervention to resolve problems and for the coordination of public services in support of a child’s wellbeing would be diminished. Separate questions will arise as to whether, in an individual case, early intervention and coordination of services could be achieved by less intrusive means. That issue can be considered under the final question of fair balance.

94. The fourth question is whether the impact of the rights infringement may be disproportionate to the likely benefit of the impugned measure. This requires consideration of the operation of Pt 4 of the Act in particular cases, since it cannot be said that its operation will necessarily give rise to disproportionate interferences in all cases. In that regard, the named person’s functions to give advice, information and support (s.19(5)(a)(i)) and to help the child, young person or parent to access a service or support (s.19(5)(a)(ii)) are, as we have said, less likely to give rise to any question of disproportion in a particular case. The provision of access to services could involve the creation of a child’s plan under Pt 5 of the Act, but that involves no compulsion. The Act does not alter the statutory criteria of any compulsory measures in relation

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to children and young people. Thus the criteria for making a child assessment order in s.36(2) or a child protection order in ss.38 and 39 of the Children’s Hearings (Scotland) Act 2011 require (put shortly) reasonable grounds to suspect that the child is likely to suffer significant harm. The long list of grounds upon which a child may come before a children’s hearing with a view to making a compulsory supervision order (which can include taking the child away from home) in s.67 of that Act remain focused upon the risk of harm to the child or the child’s own misconduct.

95. Nevertheless, there must be a risk that, in an individual case, parents will be given the impression that they must accept the advice or services which they are offered, especially in pursuance of a child’s plan for targeted intervention under Pt 5; and further, that their failure to cooperate with such a plan will be taken to be evidence of a risk of harm. An assertion of such compulsion, whether express or implied, and an assessment of non-cooperation as evidence of such a risk could well amount to an interference with the right to respect for family life which would require justification under art.8(2).

Given the very wide scope of the concept of “wellbeing” and the SHANARRI factors, this might be difficult. Care should therefore be taken to emphasise the voluntary nature of the advice, information, support and help which are offered under s.19(5)(a)(i) and (ii) and the Guidance should make this clear.

96. The function, in s.19(5)(a)(iii), of discussing or raising a matter about a child or young person with a service provider or relevant authority, involves the disclosure of information. It and the information-sharing provisions in ss.23, 26 and 27 raise difficult questions of proportionality in particular cases, where the information holder, when considering whether the information ought to be provided (s.26(2)(b) and (4)(b)) or whether to provide information under s.26(8), will have to consider carefully whether the particular circumstances justify the disclosure of the particular information. In our view, given this role of the information holder, it cannot be said that the operation of the informationsharing duties and powers in relation to any of the named person’s functions will necessarily amount to a disproportionate interference with art.8 rights. But for the problem in relation to the requirement that the Act be “in accordance with the law” (paras 79–85 above), we consider that the Act would be capable of being operated in a manner which is compatible with the Convention rights.

97. But the task facing the information holder is a daunting one because the Act does not address the factors to be considered in an assessment of proportionality and the RDSG gives exiguous guidance on that issue. The provisions of the Act appear to point toward a more relaxed approach to disclosure than is compatible with art.8. Section 26(1) and (3) oblige the information holder to provide information which meets the criteria set out in subss.(2) and (4). Those criteria include an assessment of whether the information is likely to be relevant to the exercise of functions which may affect the wellbeing of the child or young person. In turn, the assessment of that wellbeing under s.96, as explained by the RDSG, involves the use of very broad criteria which could trigger the sharing of information by a wide range of public bodies (as to which see para.5 above) and also the initiation of intrusive inquiries into a child’s wellbeing. In our view, the criteria in ss.23(3), 26(2) and 26(4) by themselves create too low a threshold for disclosure (as explained at para.56 above), and for the overriding of duties of confidentiality in relation to sensitive personal information.

98. Under ss.23(4) and 26(5) the information holder, when deciding whether information ought to be provided under ss.23(2) and 26(1) or (3), is obliged so far as is reasonably practicable to ascertain and have regard to the

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views of the child or young person. But those provisions do not require that person’s consent, or require that there be any good reason for dispensing with her consent, before what may be highly personal information, imparted in confidence, is shared. Further, the information holder is under no obligation to ascertain the views of the child or young person, or her parents, when exercising a discretion under s.26(8), in which the test is whether the provision of the information is considered to be “necessary or expedient” for the purposes of the exercise of any of the named person functions. Thus the exercise of the s.26(8) power could involve the overriding of duties of confidentiality without any obligation even to consult the child, young person or parent. The RDSG (at paras 4.1.28 and 10.7.4) presents such consultation as good practice but it is not obligatory, even on a qualified basis. Further, there is no provision imposing even a qualified requirement that the child or young person or her parents be warned that confidential information may be disclosed, or informed after the event that it has been shared.

99. In many circumstances the Act’s intended overriding of the duty of confidentiality may not be achieved. In our discussion of reserved matters (paras 27–66 above) we showed that, because of the terms of ss.23(7) and 26(11), the DPA and the Directive impose significant restrictions on the ability of public authorities in the performance of their duties under ss.23(2), 26(1) and (3) to share information which is “sensitive personal data”, such as information about a person’s health or sexual life, without the explicit consent of the data subject. We showed that, for the same reasons, the power under s.26(8) to share information remains subject to all of the restrictions of the DPA against disclosure, thus normally requiring consent of the data subject, in relation also to non-sensitive personal data. Thus some of the concerns of the appellants and the interveners in relation to the criteria for the sharing of information are, on a proper interpretation of the legislation, addressed by the continued operation of the DPA and the Directive, which in many cases will require the consent of the data subject to the sharing of the information.

100. None the less, there may be information which is not “sensitive personal data” which is none the less confidential. Even with the restrictions of the DPA, the Act does not point towards a fair balance in relation to the disclosure of such confidential information in the performance of duties under ss.23(2), 26(1) and 26(3). The central problems are the lack of any requirement to obtain the consent of the child, young person, or his or her parents to the disclosure, the lack of any requirement to inform them about the possibility of such disclosure at the time when the information is obtained from them, and the lack of any requirement to inform them about such disclosure after it has taken place. Such requirements cannot, of course, be absolute: reasonable exceptions can be made where, for example, the child is unable to give consent, or the circumstances are such that it would be inappropriate for the parents’ consent to be sought, or the child’s best interests might be harmed. But, without such safeguards, the overriding of confidentiality is likely often to be disproportionate.

101. In order to reduce the risk of disproportionate interferences, there is a need for guidance to the information holder on the assessment of proportionality when considering whether information should be provided. In particular, there is a need for guidance on: (a) the circumstances in which consent should be obtained; (b) those in which such consent can be dispensed with; and (c) whether, if consent is not to be obtained, the affected parties should be informed of the disclosure either before or after it has occurred. Also relevant is whether the recipient of the information is subject to sufficient safeguards to prevent abuse: M S v Sweden. Further, if the guidance is to operate as “law”

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for the purposes of art.8, the information holder should be required to do more than merely have regard to it.

A

III. The EU law challenge

102. The appellants also challenge the information-sharing provisions of ss.26 and 27 of the Act on the ground that they are incompatible with EU law.

Counsel referred to the following articles of the CFR: art.7 (respect for private and family life), art.8 (protection of personal data), art.14 (right to education)— particularly 14(3): respect for the right of parents to ensure that the education of their children conforms with their convictions—and art.33(1) (family and professional life). In short, they submitted that the sharing of personal data without consent and absent strict necessity infringed one or more of those articles of the CFR. 103. It is not suggested that the DPA fails to transpose the Directive or is contrary to the CFR. Insofar as the appellants’ complaint relates to the sharing of what the DPA describes as “sensitive personal data”, we have, in large measure in agreement with the Inner House and the Lord Ordinary, interpreted the relevant provisions of the DPA and the 2014 Act as preserving the stringent restrictions in Sched.3 to the DPA and having the effect that cond.7(1)(b) of Sched.3 is not met (paras 49–58 above). Insofar as the DPA allows the 2014 Act to authorise the disclosure of (non-sensitive) personal data which are not subject to any duty of confidentiality, we do not see a separate issue arising under EU law.

104. Insofar as the challenge relates to the overriding of confidentiality of personal data (whether or not sensitive), we have addressed this in our discussion of art8 of the ECHR. In Volker und Marcus Schecke GbR and Hartmut Eifert v Land Hessen, the Court of Justice of the European Union (Grand Chamber) held (para.52) that the limitations which may lawfully be placed on the right to the protection of personal data correspond to those tolerated in relation to art.8 of the ECHR. We are therefore satisfied that there is no additional incompatibility with EU law beyond that which we have found in relation to art.8 of the ECHR. 105. The appellants also submit that the Act contravenes EU law because there is no provision enabling a parent or child to seek the removal of information concerning a child from a named person’s database once the data are no longer needed for the purposes for which they were collected or processed. Reference was made to Google Spain SL v Agencia Española de Protección de Datos, paras 93–97. We do not accept this submission. In our view the data retained by public authorities in the exercise of powers under the Act are subject to the fifth data protection principle in Pt I of Sched.1 to the DPA, namely that “personal data processed for any purpose or purposes shall not be kept for longer than is necessary for that purpose or those purposes”. This is because this provision is not inconsistent with the disclosure which ss.23(2), 26(1) and 26(3) of the 2014 Act allows: DPA s.27(3) and (4) (paras 53 and 54 above). Part V of the DPA empowers the Information Commissioner, whether at the request of a data subject or otherwise, to enquire into a data controller’s compliance with the data protection principles. Under s.40 of the DPA, the Information Commissioner is empowered to serve an enforcement notice on a data controller to require such compliance. The DPA thus has protections for a data subject, who can also, if necessary, seek judicial review of a decision of the Information Commissioner. In our view, the data subject is thereby given a legal remedy and judicial protection as required by Schrems v Data Protection Commissioner, para.95.

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IV. Remedy

106. In summary, we conclude that the information-sharing provisions of Pt 4 of the Act: (a) do not relate to reserved matters, namely the subject-matter of the DPA and the Directive; (b) are incompatible with the rights of children, young persons and parents under art;8 of the ECHR because they are not “in accordance with the law” as that article requires; (c) may in practice result in a disproportionate interference with the art;8 rights of many children, young persons and their parents, through the sharing of private information; and (d) are not incompatible with EU law in any way which goes beyond their incompatibility with art;8 of the ECHR. We are satisfied that it is not possible to remedy this defect by reading down the provisions under s.101 of the Scotland Act 1998. Conclusion (b) therefore means that the informationsharing provisions of Pt 4 of the Act are not within the legislative competence of the Scottish Parliament.

107. It would not be appropriate for this court to propose particular legislative solutions. But we can properly say the following. We do not think that amendment of the RDSG will get round the problem in conclusion (b) or be sufficient in itself to prevent many instances of disproportionate interference to which we refer in conclusion (c). Section 28 requires the specified public authorities merely to have regard to the guidance. In relation to conclusion (b), it is necessary to address the lack of clarity as to the relationship between the Act and the DPA, arising from the conflict between the provisions of ss.23, 26 and 27 of the Act and the non-disclosure provisions of the DPA, and, in particular, the confusion caused by ss.23(7) and 26(11) when read together with provisions of the DPA such as s.35(1). Further, in relation to conclusion (c), the Act, subordinate legislation, or binding “guidance”, should address the circumstances in which: (i) the child, young person or parent should be informed of the sharing of information; or (ii) consent should be obtained for the sharing of information, including confidential information. If the resolution of the problem in conclusion (b) leads to the authorisation of the disclosure of sensitive personal data, the problem identified in conclusion (c) will become even more acute as the sharing of such data will require a compelling justification. In short, changes are needed both to improve the accessibility of the legal rules and to provide safeguards so that the proportionality of an interference can be challenged and assessed. The reconsideration of the terms of the Act and the RDSG also provides an opportunity to minimise the risk of disproportionate interferences with the art.8 rights of children, young persons and parents. Consideration of these matters will involve policy questions which are the responsibility of the Scottish Ministers and the democratic legislature.

108. Section 102 of the Scotland Act 1998 provides: “(1) This section applies where any court or tribunal decides that— (a) an Act of the Scottish Parliament or any provision of such an Act is not within the legislative competence of the Parliament . . .

(2) The court or tribunal may make an order— ... (b) suspending the effect of the decision for any period and on any conditions to allow the defect to be corrected.”

109. We are of the view that this court should consider making an order under s.102(2)(b) of the Scotland Act 1998 to allow the Scottish Parliament and the Scottish Ministers an opportunity, if so advised, to correct the defects which we have identified. We do not think that it is appropriate to set out the possible

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terms of such an order until we have received written submissions from the parties on the terms of the order, including both the period of suspension and any conditions which should be attached to the order. As was said in Salvesen v Riddell, Lord Hope, para.57, if such an order is made, it may be appropriate to give permission to the Lord Advocate to return to the court for any further orders under s.102(2)(b) as may be required. The court which is best placed to make such further orders may be the Court of Session. In the meantime, since the defective provisions are not within the legislative competence of the Parliament, they cannot be brought into force.

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Conclusion

110. We would allow the appeal and invite the parties to produce written submissions on the terms of a s.102 order within 42 days of the date of this judgment.

For the appellants: Aidan O’Neill QC, van der Westhuizen, instructed by Balfour and Manson, Solicitors, Edinburgh.

For the respondent: Wolffe QC, Christine O’Neill, instructed by Solicitor to the Scottish Ministers, Edinburgh For the intervener: Carmichael QC, instructed by Community Law Network.

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