Crofting Law Group Conference 2017 – Reflections of an Aberdeen law student delegate

This blog post is by Simon Boendermaker, a recent LLB (Hons) graduate of the University of Aberdeen. Comments from Brian Inkster, Hon. Secretary of the Crofting Law Group, and Malcolm Combe follow.

Recently I had the opportunity to attend the Crofting Law Group Annual Conference, this year held in Stornoway on the Isle of Lewis, thanks to the generosity of the Group providing free student tickets and subsidised travel and accommodation.

As my Honours courses at the School of Law included both the Rural Law and Law of Leases courses (co-ordinated by Malcolm Combe and Douglas Bain respectively), I did not want to miss the opportunity to take part in an event which appealed to my interests. Alongside this, the programme for the conference featured an afternoon of events dedicated to common grazings, which had been the subject of considerable controversy in crofting communities in the previous twelve months. The opportunity to see vigorous debate between the newly elected crofting commissioners and representatives of the Upper Coll and Mangersta grazings committees, who had been sorely affected by the actions of their predecessors, made for a captivating agenda.

The conference took place in the picturesque surroundings of Lews Castle, the ideal setting to soak in my first visit to the Hebrides. However, there was little time to admire the scenery as a packed schedule of events began with a warm welcome from Iain Maciver of the Stornoway Trust (the community landowner of property in and around Stornoway), followed by a brief introduction to the day’s events from Duncan MacPhee, vice chairman of the Crofting Law Group.

As the programme of the conference would focus on crofting law reform, Fergus Ewing, the Cabinet Secretary for the Rural Economy and Connectivity, gave a brief video outline of the stance of the Scottish Government on current legislation. Ewing highlighted that the Scottish Government agreed with the views of crofters that the law was in need of reform, expressing sympathy with the view that legislation had become overly complex for the average crofter. He also revealed that the Government was engaging with crofters over the direction that reform would take, with one approach being to consolidate legislation into a simpler Act or alternatively to adopt a clean sheet approach and developing a completely new legislative framework. However, his comments were tempered by his acknowledgement that the government currently has several “legislative priorities” which meant that crofting would be balanced alongside several competing interests.

The clean sheet approach which was mentioned by Fergus Ewing was rejected by Patrick Krause and Russell Smith, chief executive and chair of the Scottish Crofting Federation. Both noted that legislative reform was low on the list of priorities of the average crofter and that they were generally concerned with areas of practical concern, such as decrofting (that being the term used for taking land out of crofting regulation) and assignation (transfer). Smith noted that a clean sheet approach would risk “throwing the baby out with the bathwater.”

Much discussion followed the next item on the agenda, when Duncan MacPhee revealed he had successfully arranged a standard security (the Scots law term for a mortgage) over an entire croft without the need to decroft the house and restrict the scope of the security to the decrofted land alone.

Bill Barron of the Crofting Commission discussed “a year like no other” for the Commission, stating that the previous board of the Commission had witnessed deep personal splits, which had led to it failing to act as a corporate body. Barron said he was keen to learn from the mistakes of the previous year, where members of the Commission had made individual regulatory decisions which had resulted in the breakdown of trust between individual crofters and the Commission. With regard to crofting law reform, Barron insisted that the Commission would work with the Government to ensure that any new legislation would support opportunity for new entrants, an area which urgently required examination to secure the future of the sector. Finally, he expressed a hope that, with time, the Commission would be trusted to work for crofters once again.

After lunch, where I was able to speak further with Barron about his plans for the future of the Commission after the previous twelve months, Brian Inkster gave a presentation on the controversy surrounding the Commission. A complete chronology of that could take up several blog posts: Inkster’s Crofting Law Blog provides exactly that, so those interested in further reading on that topic are directed there.

The final portion of the day gave crofters a chance to discuss the current situation surrounding common grazings. Calum Maclean from Upper Coll gave a passionate account of the previous twelve months from the perspective of the grazings committee on Upper Coll. He could not understand how Barron and the new Crofting Commission could be expected to win back the trust of ordinary crofters when they had done little to actively address the effects of the decisions of the previous Commissioners in 2016. However, he was able to finish by stating that ordinary crofters did not want to abandon the current framework but that serious work would be required to secure the future of the sector.

Crofting Law Group Discussion
A discussion during the conference.

The lively debate provoked by the afternoon’s discussions continued well into the evening, when I spoke to several crofters who had attended the conference over dinner and gained some invaluable insights from these conversations. A desire for reform was evident and it is clear that stakeholders will need to undertake serious engagement to secure the bright new future that crofting is desperately in need of.

After writing my dissertation on agricultural holdings, I was able to draw a number of parallels throughout the day between the situation of crofters and issues faced in the agricultural holdings sector, where secure tenants also benefit from a parcel of rights (some which are particularly strong, perhaps even stronger than the rights of the landowner). All of this has ongoing implications for the wider rural sector. For my part, the conference and indeed the discussions over dinner brought to life some of the issues that had been discussed in my law degree. Thanks again to the Crofting Law Group for providing me with the opportunity to attend this year’s conference. I would not hesitate to recommend future conferences to other interested students.

Comment from Brian Inkster

We have been running the assisted places scheme to our conferences for law students at the Universities of Aberdeen, Dundee, Edinburgh, Glasgow and Strathclyde for a few years now. It has been very well received by the Universities. It gives their students an opportunity to find out more about crofting law, a subject seldom touched upon at university. It is hoped that this exposure to crofting law may encourage those students to become tomorrow’s crofting lawyers. The Crofting Law Group will continue the assisted places scheme for next year’s conference which will be held in Edinburgh.

Comment from Malcolm Combe

The University of Aberdeen is very grateful to the Crofting Law Group for the support it gives to students from across Scotland. Whilst some courses at the Scottish universities touch on crofting matters, even with the best will in the world there is no way we could replicate a programme of events akin to the Crofting Law Group Conference for students to benefit from. We look forward to working with the Crofting Law Group in future, and if any other conferencing organisations would be interested in offering a similar student support scheme  we at the School of Law would be delighted to hear from you.

Crofting Students
From left to right: Brian Inkster (Secretary CLG), George MacDonald (Committee member CLG), Maureen Duffy (University of Strathclyde), Duncan MacPhee (Vice Chair CLG), Andrew Agnew (Dundee University), Fraser McDonald (Edinburgh University), Simon Boendermaker (University of Aberdeen), Gemma Thomson (University of Glasgow), Iain Maciver (Committee member CLG).

 

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Rent Deposits – Filling in the Gaps

This blog post is by the undergraduate LLB (Hons) candidate Matthew Nicol.  Matthew is a member of this year’s Scottish Law of Leases Honours class.

Background

With all the major world-shaking events that are at present going on around us, it is easy to overlook the smaller things, which may, nevertheless, still have an effect upon us.  For example, on the Brexit/Trump scale of 0-10, the Tenancy Deposit Schemes (Scotland) Regulations 2011 might, on the face of it, rate at 0.00001. Yet the scheme significantly impacts upon landlords and tenants in Scotland’s private residential rented sector, and could, in the event of failure to comply with the regulations, result in landlords becoming liable to pay over to their tenants a hefty sum (albeit one that cannot exceed three times the amount of the tenancy deposit). In a case where the monthly rent is, say, £1560 (based upon three students sharing a flat, each paying £125 per week), the maximum penalty for non-compliance with the regulations would be £4875, with the money going to the tenants. This sanction is intended to deter non-compliance with a statutory scheme, providing enforceable protections to tenants against non-compliant landlords.

Phoebe Russel-Smith and others v Ijeoma Uchegbu

The case of Phoebe Russel-Smith, Stephanie Dion-Jones and Alexis Herskowit v Ijeoma Uchegbu [2016] SC EDIN 64 (hereinafter Russel-Smith) related to a dispute regarding a landlady’s admitted failure to lodge the deposit in an approved deposit guarantee scheme. Once the court action had commenced this requirement of the Regulations was eventually complied with, but there was another failure on the part of the landlady in relation to the provision of information (under Regulations 3 and 42 of the 2011 Regulations) to the tenants.

This note focusses on the issues arising out of a summary application raised against the landlady by three of her four co-tenants.

Res Judicata

For reasons that were unknown to the sheriff, one of the co-tenants, Marc Fitchett, chose not to participate in the action against the landlady. Notwithstanding this, the court proceeded by assessing the level of the penalty at the top end of that which was available to the claimants collectively (as in, the full monthly rent, as paid by all four tenants, times three).

Given Fitchett’s non-participation in the legal action, a problem was posed for the Sheriff in relation to the quantum of the sanction.  As Sheriff Welsh noted (at paragraph 6)

[o]nly three of the four tenants under the tenancy make this application. I do not know if Marc Fitchett has waived his right to apply for sanction. He can apply up to 31 October 2016. However, if he did, the landlady could not, in my opinion, be sanctioned twice. The scheme does not provide for that.

Clearly, this could result in some prejudice to the fourth tenant, as by not being joined in the action raised by the other three – was he even invited to? – the fourth tenant would lose out not only on the financial compensation at the time of the initial claim, but any further right of his to exercise this claim. Such is the nature of the doctrine of res judicata.

Res judicata, broadly stated, concerns circumstances in which pursuers are barred from continuing litigation where there has already been final judgement. The term is synonymous with ‘the matter decided’ and carries an implication, as recently illustrated in Smith v Sabre Insurance [2013] CSIH 28, that all losses arising out of a single incident ought to be raised at the same time (discussed by the Scots law firm Brodies here).  The case of Smith set out that this principle is a long-established and highly practical element of Scots law.

The case of Russel-Smith perhaps illuminates – in its particular statutory context – a particular quirk of the res judicata doctrine, whereby in trying to protect the defender from future litigation where a decision has already been made, prejudice actually crystallises instead on one (or more) persons who might have been potential pursuers.

The court’s response in Russel-Smith was robust in terms of addressing the issue of res judicata. The sheriff refused to reduce the award to the three co-litigant co-tenants pro-rata by 25% (so as, it had been submitted, to reflect non-participation in the action by one co-tenant).  This was because whatever course of action was taken, including an award made to the three tenants, the effect of that award would be that the fourth tenant would then be prevented from having an exercisable claim against the landlord. The sheriff was therefore moved to award the full amount to the three co-litigants, thereby preserving a right (and surely giving rise to a claim in unjustified enrichment) of the fourth tenant to claim against his former co-tenants for a 25% share of the award (which might be pursued under the new simple procedure, whereas actions under the Tenancy Deposit Scheme Regulations must be raised by way of summary application during or within three months of the termination of the tenancy; note also that such a claim would be subject to statutory prescription and not affected by the time limit for the raising of a claim under the regulations).

In terms of resolving the potential inequities which might result from the blocking any further claim on the ground of res judicata when an otherwise viable claim under the 2011 Regulations is not exercised at the same time as other claims (for example, where one co-tenants takes a month’s holiday following the termination of the tenancy then returns to their family home in Aberystwyth, or wherever, while the other three move on to another shared flat together and do not feel inclined to search out their former flatmate), the judgement in Russel-Smith does assist in granting another opportunity to a party to claim.

However, and as has already been referred to above, a distinct possible downside emerges out of the relative fluidity which the approach of the sheriff in Russel-Smith gives to the tenants in order to achieve a resolution for them collectively. Without knowing the rationale of the fourth tenant for refusing to partake in the initial claim, it could speculatively be said that the judgment in Russel-Smith appears to offer such a tenant the right to ‘piggyback’ on the efforts of his fellow tenants in the initial litigation after he had perhaps refused to be involved in that action.

The policy and statutory agenda behind the Regulations is to address the problem of landlords unfairly misusing tenancy deposits, and to protect against the landlord holding the deposit and then becoming insolvent. It is arguable that the effect of the judgement of Russel-Smith is to create the scope for tenants making claims against one another in the aftermath of a judgement against a landlord, which complicates the horizontal relationship between co-tenants (as well as distorting the vertical relationship between tenant and landlord).

Given that one of the primary aims of the Tenancy Deposit Scheme Regulations is (according to the legal commentator Angus McAllister) to ‘ensure that deposits are returned quickly and fairly, particularly in the event of a dispute’, the judgement of Russel-Smith appears to complicate this approach. The sheriff’s approach adds an extra dimension to the dispute process surrounding the deposit. Whilst it is correct that the matter has been resolved by the case of Russel-Smith, in that all of the losses arising from the incident were raised at the same time, the equity of the approach adopted by the court in Russel-Smith is not unchallengeable. Now we are faced with a question of whether the matter is truly decided if the full losses have been awarded to the claimants, yet there exists a right of another claimant to derive his share of the sum at a later date.

The calculation of the penalty

In calculating the amount of the penalty, Sheriff Welsh (at paragraph 9 in his judgement) adopted a two-stage process.  Firstly, he adjusted the full sum of the deposit so as to be pro rata of the number of ‘unprotected’ days out of the term of the tenancy:

In my judgement there are two broad aspects to the sanction […] Firstly, the lease lasted 334 days, for 270 days of which, the deposit was unprotected and the tenants deprived of protection from the scheme and the proper information. In my judgement, to mark the fact that the defender breached the regulations for a sustained period of time which subjected the tenants and the deposit to a risk the regulations are designed to avoid, the proportionate and appropriate starting point for sanction in these circumstances is £1550 divided by 334 multiplied by 270. This produces a figure of £1253.

Then he made an assessment of what might be termed the landlord’s culpa element

Secondly, to that sum I will add a weighting to reflect the fact that the landlady was repeatedly officially informed of her obligations and still failed to comply. I do not accept the suggestion this was wilful defiance of the regulations. I am more inclined, on a balance of equities, even if finely judged in this aspect of the case, to accept the submission that the defender was dilatory in attending to her obligations to protect the deposit and advise the tenants of their rights rather than in wilful defiance of the purpose of the scheme. In assessing this aspect I also weigh in the balance the fact that no actual prejudice occurred and in the final analysis the purpose of the regulations was not defeated and the deposit was returned to the tenants, in full, without dispute. I also take into account the early admission of breach in these proceedings and the responsible way the defender has remedied the situation through her agents. I had the benefit of seeing the defender during the proceedings and while it may be said; ‘There’s no art to find the mind’s construction in the face’ [Macbeth, Act 1 Scene 4], I am satisfied the assurances given by Mr Wells, that she deeply regrets the position she now finds herself in, are genuine.  For all these reasons, I will set the financial penalty to reflect this second factor, at £600.

The maximum possible penalty would have been £4,650, meaning that under Sheriff Welsh’s two step approach – with the first stage ‘deprivation of protection’ element having been set at £1,253 – the maximum ‘stage  2’ culpa element would have been £3,397.

Postscript

On 17 March 2016 the Scottish Parliament passed the Private Housing (Tenancies) (Scotland) Act 2016 (asp 19).  It received Royal Assent on 22 April 2016, and is currently subject to commencement.  Much necessary infrastructure for the new statutory tenancy regime created by the statute has to be put in place, and full commencement may take some time.  One aspect that is of interest here relates to Part 2 of the Act, under which the landlord is required to provide certain specified information to the tenant.  In the event of the landlord’s failing to do so, the tenant may make an application to the First-Tier Tribunal, with the tribunal having the power to sanction the landlord’s failure to provide the required information.  Section 19 of the 2016 Act allows the Tribunal the power to penalise the landlord by requiring her to pay ‘the person’ who made the application an amount not exceeding, in specified cases, six month’s ‘rent’.  Section 16 subsections (6) and (7) specify:

(6) In a case where two or more persons jointly are the tenant under a tenancy, references to the tenant in this section are to any one of those persons.

(7)  In subsection (2), “rent” means––

(a) the amount that was payable in rent under the tenancy at the time that notice of the application was given to the landlord, and

(b) in a case where two or more persons jointly are the tenant under the tenancy, the amount mentioned in paragraph (a) divided by the number of those persons.

Section 5 of the 2016 Act has the effect of extending references in other enactments to tenancies and to connected expressions so as to cover private residential tenancies under the 2016 Act (unless it appears from the context that a particular reference is not intended to cover private residential tenancies).

The First-Tier Tribunal for Scotland Housing and Property Chamber is to inherit the jurisdiction of the Sheriff Court in respect of private residential tenancies. The Chamber will take over the functions of the Private Rented Housing Panel and the Homeowner Housing Panel with effect from 1 December 2016, and will begin to hear more private rented sector cases in consequence of the transfer of jurisdiction from the sheriff courts plus actions relating to private residential tenancies under the 2016 Act from December 2017.

If Sheriff Welsh’s analysis in respect of res judicata in the context of tenancy deposits is to be followed, there will be the situation in which the First-Tier Tribunal will apply one (res judicata) rule in respect of rent deposits and another (non-res judicata) in respect of ‘certain specified information’.  The potential for confusion is clear. That being said, in either case, professionalism and best practise are clearly the landlord’s best safeguard.

Finally, it is worth noting that the First-tier Tribunal for Scotland Housing and Property Chamber and Upper Tribunal for Scotland (Composition) Regulations 2016 allow for tribunals of up to three members:

Composition of First-tier Tribunal

2 (1) Subject to paragraph (2) the First-tier Tribunal, when convened to decide any matter in a case, shall consist of—

(a) a legal member;

(b) a legal member and one ordinary member; or

(c) a legal member with two ordinary members.

This introduces scope for differences of opinion in relation to the quantification of statutory penalties, making Sheriff Welsh’s two-step mode of calculation an attractive approach.