BulletinTHETHE

of the Agricultural Law Association

Issue 48 — Spring 2007Issue 48 — Spring 2007

of the Agricultural Law AssociationBulletin

ALTERNATIVE DISPUTE RESOLUTIONMediation – settling arguments the civilised wayHugh Davey reminds us of the increasing importance of mediation and its benefits

FOOTPATHSChoose your weapons carefullyA case report from Alexander Hall highlights the need to choose the correct forum

RURAL CONVEYANCINGEnvironmental due diligence for agricultural land and propertyChris Taylor analyses the weaknesses of environmental searches over rural land and discusseswhat is truly required

STAMP DUTY LAND TAX“The hardest thing in the world...” – an update on SDLT andPartnershipsAndrew Campbell with a further update on the complexities of SDLT treatment of partnerships

EUROPEAN FOCUSThe future’s bright, the future’s greenGeoff Whittaker looks at drivers to change and the EU’s new agreement on biofuels

SCOTTISH PERSPECTIVECompulsory purchase and compensation in ScotlandOdell Milne considers the best way to deal with a compulsory purchase notice

LIVE AND LEARN (ALA STUDENT/TRAINING SECTION)Keeping the grass downA look at the modern considerations for use of land by animals from Geoff Whittaker

NEWSCross compliance provisions proposedLack of official communicationFunding agreed but RDPs remain works in progress

BOOKSConveyancing searches and enquiries – Russell HewistonGrazing Agreements – CAAV Publications No.186

OTHER FEATURESGeoff’s GeottingsStatutory InstrumentsBrussels UpdateForthcoming events

CONTACT DETAILS

Geoff WhittakerEditor/Consultant & AdviserKimblewick Cottage, Prince Albert Road,West Mersea, Colchester, CO5 8AZ.Tel: 01206 383521email: geoff@geoffwhittaker.com

Geoff Whittaker is the contact for readers’ letters or comments and welcomes enquiries from anyone wishing to contribute material to The Bulletin. Photographic contributions will be gratefully received and credited accordingly. The Bulletin does not accept advertisements but is happy to insert flyers.

Eleanor PinfoldConsulting Editor/Administration DirectorPinfold & Co., 63 Palmer Avenue, Cheam,Surrey, SM3 8EF.Tel: 020 8644 8041; Fax: 020 8641 7328email: eleanor@pinfold.biz

Alan BrakefieldFinancial Director6 St. Peter’s Close, Chislehurst, Kent, BR7 6PD.Tel: 020 8467 0722; Fax: 020 8295 5554email: arbrake@globalnet.co.uk

Alan Brakefield is the contact for details of the activities of the Association and the benefits of membership

Photographic credits:Cover photograph by Geoff Whittaker

Designed and produced by Geoff Whittaker

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ALTERNATIVE DISPUTE RESOLUTIONMediation – settlingarguments the civilised wayHugh Davey, Fleet Solicitors LLP, Taunton

Disputes can arise for the farming client inmany different ways. All too often thereis the intra-family disagreement; we have

also the familiar boundary dispute; then thereare rights of way, damage caused by escapingstock and mud on the road: all a breedingground for problems – the list is endless forthe poor farmer. These issues have one thingin common: the need to find a fast and costeffective route to resolution.

One answer can be mediation. So what is it,and what it is not? Mediation has been defined ina number of ways, but probably as good as anyis to describe it as a voluntary, non-binding‘without prejudice’ method of resolving disputes.What it is most certainly not is a dress rehearsalfor trial. Consequently, it is not necessary (oreven appropriate) to lay the entirety of theevidence before the mediation or to ‘crossexamine’ the other party’s evidence.

Mediation is a word which is often bandiedaround, but has built up something of a mystiquearound itself. How does it work?A trend that will continueThe starting point is that there must be anagreement between the various parties to thedispute to enter into the mediation process.Whilst mediation has been very activelysupported and promulgated by the judiciarythe courts have been shy to actually forceparties to enter into mediation. However, wherea party has refused to mediate and the casehas then gone on to trial the reluctant party has,on occasion, ended up being heavily penalisedin costs.

Most commentators agree that this trendtowards mediation is likely to continue; althoughit is worth bearing in mind that it would seem tobe entirely inappropriate for every case to bemediated and for it to become a necessary stepfor every dispute. This would result in a wateringdown of the strengths of mediation.

Once the parties have agreed to mediate theythen contact one of the number of companiesthat provide a mediation service. There are ahandful of organisations that have built up asubstantial reputation in this field and havebecome clear market leaders, although it shouldbe remembered that most mediators will take

instructions direct and by following this routethere are usually substantial savings.

The mediator sends out an agreement tomediate for the parties’ legal representatives tosign. This will covers, for example, the fees to becharged, confidentiality, termination rights and theright for the mediator to hold “private sessions”with one party at a time.

Normally it takes about six to eight weeksfrom the parties deciding to mediate to themediation itself. It is usual for the parties priorto the mediation to prepare a small mediationbundle. This is categorically not a trial bundle,but is more similar to a ‘core’ bundle that isoften prepared in large cases, especially thoseconducted in the commercial courts.

What this bundle includes (which issignificantly different from litigation) is a positionstatement. This is a ‘without prejudice’ documentand should include all offers that have beenmade to date and any new offer the partyis prepared to make at the beginning of themediation. It might also state on a ‘withoutprejudice’ basis lines of argument and, perhaps,claims that for the purposes of the mediationwill not be pursued or defended.

It is rare for the choice of mediator to bea contentious process in itself. Normally, theparties’ legal representatives exchange ashortlist of suitable mediators and then oneis chosen from this list. Significant benefitsThe benefits of mediation in agricultural disputesare significant. First, there is speed.By definition, a mediation which works willresolve the claim sooner than trial. Somemediations occur even before a claim has beenissued at court. However, by and large, mostoccur after statements of case ( pleadings) havebeen served, although a number take place ata relatively late point in the case.

That leads on to the second significant benefitwhich is, of course, savings on costs. Even ifthe process takes place close to trial, it has tobe remembered that usually about a third oflitigation costs are incurred in the immediatepreparation for and then trial hearing itself.

The third factor is flexibility. This can be ofconsiderable importance in finding a resolutionwhich finds favour with both parties (which of

course is necessary for there to be a successfuloutcome to the mediation). This freedom can beparticularly useful in the sphere of agriculturallitigation. There can, for instance, be barteringof assets between family members or propertyissues resulting in, say the grant of access/rightsof way or property transfer between neighbouringproperties owned by different parties. Or a stripof land could be exchanged for a right of way.Such settlements are completely beyond thoseavailable to a court.

Finally, there is the huge incentive of control.As discussed above, a mediation will only havea successful outcome if it is signed up to by theparties. Consequently, the parties themselvesagree to the outcome. It is not forced upon themby a judge. Often parties come away frommediation considering that they may perhapshave not achieved the very best outcomeavailable to them in the litigation, but that theyhave made substantial savings in costs and time.

Further, what they have agreed to is asubstantially better outcome than the worstcase scenario. The parties will have been toldthat however strong their claim or defence of thelitigation is there are always risks in litigation. Arethey prepared to take the gamble of having ‘a badday in court’ and its repercussions? The successrate for mediation speaks for itself. Over 85% ofcases that are mediated settle on the day or veryshortly afterwards.Potential downsideSo what are the difficulties that can be facedwhen embarking on mediation? There arecertainly instances from time to time when oneparty may go through the mediation process with

Over 85% ofcases that aremediated settleon the day orvery shortlyafterwards

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Alternative dispute resolutionAlternative dispute resolutionmala fides. This is often caused by the party notwanting to mediate at all but also not wanting torisk an adverse costs Order by refusing tomediate.

Even if this is the view before the mediationprocess starts it is surprising how often oncethe parties are actually involved in mediationthen the process takes over and even the mostunsettleable of cases finds some middle groundand a resolution.

The other main problem that occurs is due toa poor quality mediator. It is essential that themediator ‘controls’ the mediation and has therespect of the parties. If that is not the case andthere creeps in any suggestion that the mediatoris in some way partisan, then the process willalmost certainly flounder.

It is usual for the costs of the mediation to beborne equally between the parties, although thatmay change, in that where there is a costs Orderit is normal for the mediation costs to be includedin this figure. Risks of not mediatingThe perils of robustly ignoring mediation wereshown in the case of Halsey v Milton KeynesNHS Trust1. The Claimant proposed mediationon a number of occasions both before and afterproceedings were issued. The Defendant refusedto mediate believing that it had no case toanswer. The Defendant then won at trial (whichone might have thought would have vindicatedits position).

The Trial Judge did not see it that way atall and held that all lawyers who conduct litigationshould now consider alternative dispute resolution(which in most cases will mean mediation), andalthough the court could not compel mediationit could make an order encouraging partiesto mediate.

The judge gave six factors which may berelevant to the question whether a party hadunreasonably refused alternative disputeresolution. These factors were:l the nature of the case;l the merits of the case;l the extent to which other settlement methods

had been attempted;l whether the costs of alternative dispute

resolution would be disproportionately high;l whether any delay in setting up and attending

the alternative dispute resolution processwould have been prejudicial; and

l whether alternative dispute resolution had areasonable prospect of success.

Most agricultural litigators now consider that it isextremely risky to refuse in any circumstances tomediate where it is proposed by the other side.

In the case of Leicester Circuits Limited vCoates Brothers Plc2 Coates pulled out of themediation two days beforehand after havingagreed to mediate. Coates argued that mediationwas just another form of negotiation. Moreover,they argued that in this instance such steps hadmerely come to nothing and that in any eventthere had been no real prospect of a successfulresolution of the issues.

These arguments found little favour withthe court of appeal, with Judge LJ commenting:“the whole point of having mediation, and onceyou have agreed to it, proceeding with it, is thatthe most difficult problems can sometimes,indeed often are resolved… having agreed tomediation it hardly lies in the mouths of thosewho agree to it to assert that there is no realisticprospects of success”. The court went on topenalise Coates in costs.

The courts’ fondness for mediation was furthershown in the case of Mona Al-Khatib v AbdullahMasry3. The court directed that letters should goout to the parties “inviting” them to mediate. Thismediation failed, despite which one of the Courtof Appeal judges themselves supervised the

appointment of another mediator. This time roundthe parties reached settlement. It is interesting tospeculate what costs penalties might haveensued had that mediation failed.The client’s viewpointSo it is clear that the judges like mediation, butwhat of the agricultural client?

The wide variety of agricultural disputes thatexist are often complex because there areunderlying issues beyond the legal ones lying onthe surface. This complexity may not necessarilybe reflected in great monetary value, but causesmajor disruption and distress in the lives of thoseinvolved.

This combination makes such claims ripefor resolution by mediation, to the satisfactionof clients.

Hugh Davey is an agricultural litigatorand qualified mediator

1 [2004] EWCA Civ 5762 [2003] EWCA Civ 3333 [2004] EWCA Civ 1353

The EC Commission has proposed revisionsto the cross-compliance regime following

its own review of the system andrepresentations made to it by representativebodies across Europe.

Cross compliance requires farmers tocomply with pre-existing environmental, animalwelfare and sanitary and phytosanitarystandards as a condition of receiving the singlefarm payment.

It has come in for criticism – not just in theUK – for the additional burdens of inspectionsto which it subjects farmers. Tales arewidespread of heavy-handed and arrogantinspectors appearing unannounced at the farmoffice and demanding, effectively, that thefarmer cease to work in order to accommodatetheir requirements.

The Commission has reacted by proposinga series of individually relatively minor revisionswhich, it hopes, taken together will improve thefarmer’s lot and reduce the burden of red tape.

Amongst its proposals:l Member States should have discretion not

to pursue minor breaches which would notresult in a reduction in payment;

l a de minimis rule would exempt any penaltybelow €50 and substitute a warning letter;

l a single control rate of 1% would be appliedfor on-the-spot checks;

l repeat checks in cases of non-compliancewould need to address only the areas ofweakness, not the gamut of obligations,as at present;

l 14 days’ notice of inspection would beallowed, except where it would prejudicecontrol;

l authorities would be obliged to identifyoptimal times of year for inspection, subjectto the same exception;

l an inspection would need to cover only50% of the land instead of the whole;

l control reports would have to be issued tofarmers within three months;

l an improved method of selecting farms forinspection would be implemented;

l clarification would be issued to authoritiesof the information to be given to farmers;

l simplification of the 10-month rule is alsoproposed.

Further detail will be published in due course:see ec.europa.eu/agriculture/simplification/crosscom/ GDW

Cross compliance revisionsproposed

Geoff ’s Geottings

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Cross compliantdraftingNoted on the facing page are the EC

Commission’s intentions to review themechanics of the cross compliance regime.Most of us have experience of cases wherethe authorities have ‘come the heavy’ witha complete absence of any empathy with thefarmer’s position.

The complaints were mirrored all overthe Union and we shall have to see whatdifference the relaxations and clarificationswill have in practice.

An aspect of the regime which causes somesurprise is the number of Members who havereported that the whole question is ignored inagreements submitted to them by others. Landuse agreements of all sorts are being preparedwithout any thought apparently being given to thecross compliance consequences.

Liability for cross compliance rests with theSPS claimant. It is his claim that will suffer incases of breach, he who will lose money andpossibly be excluded from the scheme.

It therefore makes sense that he shouldseek to protect himself if he enters into anyarrangement with a third party for the use of hisland, whether by tenancy, licence, contract- orshare farming, agistment or whatever. And bearin mind also that liability for compliance coversthe whole of the land under a claimant’s controlfor the whole year, not just that matched againstentitlements, nor that comprised in a thirdparty agreement, and without reference tothe 10-month period. It is, in essence, indivisible.

Therefore, the contract should containprovisions which will make sure that the chickenscome home to roost with the person who isin a position to ensure or control compliance.

That does not mean that the landownershould seek to foist everything on to the thirdparty – there may be some things which remainwithin his purview – but he should make surethat he is properly indemnified, so far as possible,against any acts or omissions of the third partyinsofar as his SPS claims are concerned.

Land RegistryfeedbackWith the help of your comments in response

to this column in the last issue I was able totake up your concerns with the Land Registry intheir Customer User Panel at the end of January.

By far the majority of my correspondents saidthat they had had positive experiences with theirlocal office. Registry officers do adopt the practiceof visiting professional offices and helping outwherever possible.

There are certain local difficulties, I wastold, with the York office, due to internal internal“rationalisation” which will see the office close.I was promised that Head Office knows the scoreand would take our comments on board.

The Registry is still highly committed to thecompletion of the register, although notably thetarget date of 2012 has evolved into a generic“as soon as possible”.

In spite of some evidence to the contrary,they assure me that they will involve professionaladvisers at an early stage whenever they can –that is their clear preference. The fact is,however, that in many cases they do not knowwho the landowner's adviser is. Even if they do,the owner may have changed advisers or maychoose not to instruct them.

There is another meeting of the Panel inJuly. It is well worth keeping these mattersunder review and my email box is open toanyone who wants to add their comments tothose already received.

ALA:TheOriginal SeriesLast time, I mentioned the development of

ALA:The Next Generation, a project aimed atour less experienced Members to enable them todevelop working relationships with one anotheras well as catering for some of their CPDrequirements.

The project has got off to a good start witha meeting in Norwich in March and others fixedfor Newcastle in April and Market Harboroughin June.

Let this not create the impression that themore time-served amongst you are to be ignored.Not so, and far from it.

For many years, as many of you will know, wehave run several regional meetings – TheOriginal Series, if you want to continue the Star

Trek metaphor – throughout the year, on top ofour national meetings. A couple of hours in thelate afternoon has been followed by a glass ofsomething convivial and a chance to discuss.The reality, however, is that those meetings, withone or two notable exceptions, have not beenwell attended over the last two or three years.

I am far from alone in seeking to ensurethat ALA does not become a London-centricorganisation and that we continue to take it toMembers in their own neck of the woods. If thatis to work, however, I need to be able to arrangeprogrammes which suit those Members onsubjects which have an immediate impact intheir geographical and technical area.

If anyone has an idea for a location, a subjector a particular group of practitioners who wouldbenefit from a meeting of that type, they haveonly to let me know and I will do what I can toarrange it.

Amongst the membership, apart from those intraining or the early stages of their career, arebasically two categories of practitioner: those whodeal with rural affairs full time, are specialist andare willing to share their knowledge – or at leastargue the toss – with others; and those – bysome distance the majority – who encounter ruralbusiness less frequently but recognise it for theoddball it can be and appreciate their need forspecialist knowledge in order to deal with it.

We are fully committed to serving bothelements. I will welcome any suggestions asto how we may do so to better effect.

RetirementBeing one of those rare people who can retire

twice in their careers, Alan Brakefield hasdecided that he will retire from his duties withALA at the end of May.

Alan has been a fixture with the Associationfor more than two decades and is held in respectand affection by all of us who have beenprivileged to work with him. A past Chairman,he has been in charge of ALA’s funds asTreasurer or Financial Director since 1996.

Many Members have reason to rememberkindnesses delivered courtesy of Alan and hislong-suffering wife Joyce, who has herself donemuch in ALA’s cause. If I may be permitted apersonal note, I will be eternally grateful to themboth for the support I have enjoyed in the fiveyears since I took up this post.

May they both enjoy their richly deservedretirement.

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EUROPEAN FOCUSThe future’s bright,the future’s greenGeoff Whittaker, West Mersea

As I write this, I am just back from twoenthralling days at the Agra Outlook 2007conference in London. The word ‘outlook’

is often put down as mere crystal-ball gazing, butwhen those who are doing the gazing include notonly the EU Agriculture Commissioner and theUK Minister for Farming, but also representativesof principal WTO participants and leadingcommercial operators and academics in thefield, it is foolish not to take notice.

To be honest, Commissioner Mariann FischerBoel did not say much that she and her seniorofficers have not said often of late: the future ofthe CAP will be decided in two steps, namelya Health Check in 2008 and a full discussion,including a complete review of all budgetaryissues, immediately afterwards in order toshape the Policy from 2013 onwards.

Her opinions on the need to make fulldecoupling universal, to abolish set aside andto bring an end to milk quotas are well known.However, this time she took the opportunity toexpand her thoughts into other areas.More modulationIf she has her way, the Single Payment Schemewill enure – “in some form or other” – for sometime to come, but there will need to be a“rebalancing of funds” between Pillar 1 andPillar 2 sooner rather than later.

The problems there, of course, lie in thebudget compromise agreed at the end of theUK Presidency in 2005. Its attempts to reduceoverall CAP spending backfired when the cutswere directed principally towards the Pillar 2budget for rural development, which theCommissioner described as an own goalon the part of the Council.

The proposal to permit voluntary additionalmodulation of up to 20% to compensate wasrejected by the European Parliament, which untilrecently has frozen that much of the budget.

Resolution of the voluntary modulationproblem was been achieved in mid-March, butonly by limiting its availability to the UK andPortugal, the only two Member States to haveexpressed any interest in it.

The UK did win what it regards as significantconcessions, however. Different rates may beapplied in the component parts of the UK –Wales, Scotland, Northern Ireland and England –

subject to an overall maximum modulation of20%, and the voluntary element will not besubject to the ‘franchise’ for the first €5,000which applies to the present compulsorymodulation. Much of the detail is still lacking,but a summary of what is known at the timeof writing is on the Page 20.

We are assured that DEFRA is working allhours to finalise the England Rural DevelopmentProgramme for 2007-13 now that it knows howmuch it will have to spend. Doubtless the samecan be said of the National Assembly for Walesand the Scottish Executive.Pillar 1 v Pillar 2: a balance to strikeAlthough the Commissioner welcomed thesettlement, she repeated her view that voluntarymodulation at the behest of individual MemberStates is destructive of the cohesiveness ofthe CAP and that she would prefer to see anincrease in compulsory modulation acrossthe EU instead.

The fundamental issue between the twoPillars, she said, is that the public’s support forthe concept of rural development as opposedto direct payments and market support is notmatched by the financial support necessaryto achieve it.WTO: a compromise?Of course, any reforms of CAP are driven –though you will find it difficult to get anyCommission official to admit it – by wider globalissues still up in the air in the WTO Doha Round.The talks stalled spectacularly last summer, butare being revived against a deadline of the endof June, when the US Congress’s mandate to itsnegotiating team expires.

What may happen within the EU depends onwhat sort of compromise, if any, can be reachedin that forum, which in turn depends upon theextent to which the new weight being thrownabout by the developing nations – the SouthAmerican countries in particular – affects thefinal outcome.A bright green futureA sector that does appear to have a bright futureat present, almost regardless of that outcome, isbiofuels. We had two very enlightening talks byTim Shuldham (Coppice Resources, Doncaster)

and Richard Collins (John Amos & Co.,Leominster) at our Rural Diversification &Development conference in March, and theiroptimism was borne out at Agra Outlook byseveral commentators.

The EU agreed, in January, mandatory targetsof a 20% reduction in greenhouse gas emissionsby 2020 and a 10% biofuel component in roadfuel by the same date.

Although, when I asked the Commissionerwhat sanctions would be exercised againstMember States who failed to meet those targets,she was unable to say more than that “the usualinfringement proceedings” would be available,mandatory targets have to be better than thecurrent voluntary targets under the BiofuelsDirective. Thirteen years is, however, a longtime, and it is unlikely that many of the presentAgriculture Ministers will be around in 2020to celebrate compliance or answer for failure.Fuel v Food, Feed & FibreIndustry commentators have been concerned thatincreases in growth of oilseeds for biodiesel andgrains or sugar beet for bioethanol might lead topressure on space for food crops.

With the oncoming ‘second generation’ biofuelplants, which can convert not only grains andbeet but also cellulose and waste materials, thisbecomes less of a problem. Technology toconvert biomass to liquid (BTL fuel) will helpfurther. Both of those are expected to becommercial realities within about five years.

The Commission’s analysis has concludedthat there is enough land to meet our needs inrespect of the new targets. Biofuels, it says:l increase both food and energy security;l comply with sustainable feedstock

requirements; andl create new jobs and raise standards of living

in depressed areas.Economic analysts at Agra Outlook werereasonably convincing in their support forthose conclusions and their predictions that theone market can be satisfied without damage tothe other.

Whilst they were pessimistic of the chancesof compliance with the existing target of 5.75%biofuel use by 2010 (measured by energy output),they were less so about the possibilities ofcompliance with the newly-agreed 2020 targets.

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On 15th February this year, WorcestershireCounty Council successfully defended anappeal against a Notice it served under

S.154(1) Highways Act 1980 in Curtis vWorcestershire County Council at CirencesterMagistrates Court.

Such an appeal is very rare, even unique, andthe outcome provided an insight into the choice offorum for such disputes and a salutary lessonabout the potential financial impact making thewrong choice. BackgroundIn June 2005 the Council served on Mrs. Curtis,of Bushley, Worcestershire a Notice under S.154Highways Act 1980 requiring the removal ofoverhanging vegetation that was obstructing apublic footpath that crosses her land.

The footpath passes through thecomplainant’s garden along the bank ofthe River Severn. A Leylandii hedge and shrubhad grown across the footpath making the pathdifficult to use.

Mrs. Curtis appealed the Notice by complaintto the Magistrates Court on, inter alia, thefollowing two grounds:1. The footpath no longer existed as the land,

over which the footpath passed had beeneroded away by the river,

2. An allegation that the Definitive Map hadbeen altered by the Council without propermodification orders.

Ruth Stockley of Kings Chambers, Manchester,ably represented the County Council. DeputyDistrict Judge Hine found for the Council anddealt with the stated two grounds as follows:1. Had the path eroded away? The footpath is

shown on the Definitive Map, which accordingto S.56 Wildlife and Countryside Act 1981 isconclusive evidence of a highway with publicrights existing at the relevant date of the Map.

Consequently, the Judge had no jurisdiction togo beyond that section and ruled the publicfootpath exists.The complainant should have pursued thisissue in the correct forum rather than byappealing the notice. Highways Act 1980,S.53, provides the correct procedure forchallenging the existence of the footpath onthe Definitive Map. Evidence should havebeen presented to the Highway Authority fortheir consideration in order to make amodification order if appropriate.

2. Had there been ‘unlawful’ alterations to theDefinitive Map? Many of the perceiveddiscrepancies adduced in evidence by thecomplainant related to sections of footpathnearby but not at the material location.Consequently, the Judge disregarded many ofthose submissions.However, once again, he ruled that the appealagainst the Notice was not the correct forumfor raising this issue. If the Highway Authorityhad made changes without following thecorrect procedure, which was denied, then itwould have acted ultra vires. In such a case,the appropriate way to challenge its actionswould be by Judicial Review.

Appealing a NoticeSection 154(3) is silent regarding the merits orgrounds of any appeal, but simply states that arecipient is entitled to appeal if they feelaggrieved by the requirements of the Notice.Many of the obvious grounds – for example,disputes about the existence of the path or itsexistence or location as shown on the DefinitiveMap – were ruled to be inappropriate grounds forappeal in this case. Other procedures are inplace to deal with those.

So, on what sort of grounds might such anappeal be based? We are left with issues

including the form and clarity of the Notice itself,whether it has been served on the correct person,and whether it accurately and sufficientlyidentifies the offending tree or bush.

During the course of the hearing thecomplainant sought to demonstrate contradictionsbetween the Definitive Map and the Statement. Itwas suggested that the Statement wasambiguous and demonstrated that the path existsbut in a different location.

The Judge felt bound to follow the authority ofR(Norfolk County Council) v Secretary of Statefor the Environment, Food and Rural Affairs1,which propounded the proposition that wheresuch conflict exists, the Definitive Map takesprecedence. Consequently, the Judge acceptedthe path as shown on the Definitive Map.Choose your weapon ...The Judge identified early in the proceedings thefact that the grounds for appeal wereinappropriate. At that stage it was open to thecomplainant to withdraw the appeal. She decidedto continue, which had an impact on the eventualcosts she was ordered to pay.

Further, the complainant spent a considerableamount of time corresponding with the HighwayAuthority, persistently requesting extraneousinformation by letter and under the EnvironmentalInformation Regulations. A great deal of officertime was spent answering queries regardingmatters that were ultimately irrelevant and felloutside of this appeal process. Partly due to thisbehaviour, the Highway Authority’s costs rose andthe complainant was ordered to pay its costs of£52,000. ... or pay the priceCentral to this hefty costs award was the factthat, despite obtaining legal advice andrepresentation, the complainant continued topursue her arguments regarding the existence ofthe path through the appeal process instead of inthe correct forum.

The moral of this story does not need to bespelled out. It is essential to bring your action inthe proper forum.

1 [2005] 4 All ER 994

FOOTPATHSChoose your weaponscarefullyAlexander Hall, Countryside Service, Worcestershire County Council

A great deal of officer time wasspent answering queries regardingmatters that were ultimately irrelevantand fell outside of this appeal process

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RURAL CONVEYANCINGEnvironmental duediligence for agriculturalland and propertyChris Taylor, Argyll Environmental Ltd, Brighton

Approximately 70% of the UK is currentlyin agricultural use (DEFRA 2005) but thereis no register of agricultural land which

might be polluted1. With farming and other ruralpractices becoming increasingly intensive, it isworth recalling that soils, crops and livestock areall regarded as receptors under Part2A of theEnvironmental Protection Act 1990 (Part 2A),with an increased potential for compulsoryclean-up of contaminated land.

Where contamination affects such receptors,there is risk that the Environment Agency mayrequire the owner of the polluted land to cleanit up. Further, every farmer knows of theincreasing demands of other environmentallegislation, most recently relating to oil storageand the management of waste and asbestos2.

It has been estimated by the EnvironmentAgency that there are approximately 300,000hectares, or 325,000 potentially contaminatedsites in the UK, of which between 10% and 40%may lie in rural areas3. One cannot assume,therefore, that green fields carry noenvironmental risk.

Furthermore, while the agricultural industryaccounts for around 1% of Gross DomesticProduct (GDP), approximately 10% of allsignificant pollution incidents involve agriculturein one form or another. It is therefore importantfor purchasers of rural property assets to takeenvironmental risk and management seriouslyand to undertake proper assessment of suchrisks during a due diligence process.Types of riskThere is a wide range of both operationaland historic environmental risk associated withagriculture. During the Industrial Revolution therewas a growing demand for raw materials. Oftenthese raw materials came from the outlying ruralareas, and, in particular, the extraction ofminerals (clay, and chalk, etc.) led to a networkof pits across rural areas, many of which werelater infilled and used as farm tips or landfill sites.

Before the Control of Pollution Act 1974(COPA) there was no requirement for theregulation of such sites and even after this timewaste management practices on farms werepoor, with such tips often used to dispose of

asbestos, pesticides, herbicides and otheragricultural chemicals.

Other historic risks include gas works andelectricity generating stations which one normallyassociates with large towns and cities. Somelarge estates operated small gas works duringthe early 1900’s, until the introduction of thenational grid allowed a cheap accessible sourceof power and oil fired heating became morewidespread. Other estates had small electricitygenerating stations which used oil or sometimeswater to generate power.

In terms of operational risks, it is important todistinguish between point and diffuse sources ofcontamination.

Diffuse sources such as crop spraying andthe application of fertiliser can lead to the generaldegradation of the quality of soils and impactsupon groundwater. However, such contaminationis difficult to detect without soil sampling oraverage yield analysis (a technique whichcompares the crop yield of an area wherecontamination is suspected with the yield ofa similar area without contamination).

Point sources are more easily detected usingstandard due diligence techniques. These mayinclude chemical stores, silage/slurry stores,fertiliser stores, fuel stores, sheep dips andwaste disposal facilities. Land or buildingsassociated with such operations can usuallybe detected via interrogation of historic maps,environmental databases or if necessary, withthe aid of a site inspection.Sensitivity of agricultural areasAgricultural areas can be very sensitive tocontamination and it is vital that owners andoperators have a clear grasp of potentialcontaminants associated with current andhistoric working practices.

Due to their rural location, agricultural sitesare often situated close to or within statutorilydesignated sites such as Local Nature Reserves(LNRs) and Special Protected Areas (SPAs).These together with six other eco-receptorsare now designated receptors under Part 2A.

Agricultural sites may also be particularlysensitive to pollution because they are commonlylocated above important ground water resources

(known as aquifers) and because surface waterfeatures (lakes, rivers, etc.) may lie within ornear by them. Both surface and groundwaterresources are vital for farming and other ruralpractices (irrigation, fishing) as well as to ruralcommunities.

Groundwater provides a third of our drinkingwater in England and Wales and over 80% inthe South East (Environment Agency). ManySource Protection Zones (SPZs) – of which thereare over 2,000 – are located in rural areas andthese are further being reinforced via NitrateVulnerable Zones (NVZs), designed to reducethe nitrate levels in drinking water caused byagricultural practices.

In addition, many agricultural sites can beconsidered as sensitive as they may containcrops, livestock and residential dwellings allof which are sensitive to contamination. Past practiceHitherto, environmental due diligence ofagricultural sites has been limited due to timeand cost constraints, and by the mistakenperception that agricultural areas are unlikelyto be polluted. Assessments have tended to usedesktop procedures developed for residentialor urban commercial property, despite the factthat the risk profile of large farms and estatesis quite different.

Indeed, a recent review of the marketindicated that there were no bespoke desktopreporting options available to deal with the riskassociated with agricultural sites4. Given the LawSociety Warning Card issued in 2001 this was adangerous situation both from a contaminatedland perspective and because of the numerousother important operational compliance issues.A new solutionWhat was needed was a desktop solution tailoredwith the agricultural and rural practitioner andhis client in mind. It is for that reason that mycompany has been working with many leadinglaw firms as a preferred specialist environmentaldesktop report provider, with particular focus onthe examination of the risks associated with theacquisition and disposal of agricultural land. Such

9

sites may include farmland, estates, woodlandand associated buildings and infrastructure.

Working in this environment has led us tothe conclusion that agricultural land holdingscommonly fall into three broad categories:l small areas of land, sometimes associated

with a single dwelling. These smallerland parcels are normally up to 40 acres(c.15 hectares).

l amenity farms /small working farms or estatesof up to 300 acres (c. 120 hectares); and

l very large working farms/estates often with avariety of land uses such as arable, livestockfarming, shooting and the provision of lightindustrial units (sawmills, stone masons etc.).These might be as large as 10,000 acres(c. 4,000 hectares).

With this in mind and some assistance fromLondon solicitors Macfarlanes, we haveconcluded that a modular approach to theinvestigation is the most flexible. The need fora reasonable cost and fast turnaround is a given,but any reporting system must have the ability toinclude high-detail map review, for instance, ofregulatory consultation and site inspections whenoccasion demands, albeit at extra cost.

A small site, for example, can be investigatedfrom the desktop for around £139 (plus VAT).Higher-risk areas, such as the farmyard, canbe reviewed in more detail for, say, £60 for a4-hectare parcel. Further consultations and siteinspections can be arranged on a bespoke basisif the desktop report prompts more questions.

It goes without saying that any report, to beworth its salt, must use a comprehensive range

of environmental datasets. It must also cover theground outside the boundaries of the searchedarea, typically to a radius of 250m. Informationpresented on that basis would both satisfy theLaw Society Contaminated Land Warning Cardand answer many of the questions typically askedof the Environment Agency (albeit to a reducedradius). The datasets used should also providevaluable additional information on natural andmining related hazards, such as risk fromflooding and subsidence.Protecting the clientShould any search and investigation reveal causefor concern, the question arises of how to dealwith it. A flexible range of environmental andlegal indemnity insurance solutions are availableto insure the risk, the leading legal indemnityintermediary being Countrywide LegalIndemnities Ltd., which is authorised andregulated by the Financial Services Authorityand specifically endorsed by the Law Society andwith whom my company is pleased to havenegotiated a partnership.SummaryAgricultural sites have unique environmentalrisks and are governed by a complex array ofenvironmental and health and safety legislation.

When considered in combination with sitesize and their sometimes remote location,comprehensive due diligence can be difficultand costly. Using a modular system speciallytailored to the rural environment helps identifypotential soil and groundwater liabilities cost-

effectively and can act as the starting point formore detailed environmental due diligence orrisk transfer options.

Chris Taylor is Technical Director of ArgyllEnvironmental Limited – 0845 458 5250 – andhas created a modular bespoke desktopreporting package, SITESOLUTIONS, for useas a first-step facility in environmental duediligence and risk transfer options. Gratefulthanks are due to Tristan Ward of Macfarlanesfor his guidance in preparing this article.

1 DEFRA (CLAN 4/04) – Contamination ofAgricultural Land and Part IIA of theEnvironmental Protection Act

2 The Waste Management (England and Wales)Regulations 2006 otherwise known as theAgricultural Waste Regulations), the Control ofAsbestos Regulations 2006 and variouslegislation and codes of practice relating tochemical storage including the Control ofPollution (Control of Silage, Slurry and FuelOil) Regulations 1991 and the Code ofPractice for the Safe Use of Pesticides onFarms and Holdings – the Green Code

3 Environment Agency (Science ReportSC030039/SR) – Indicators for LandContamination

4 See PLC Environment Practice note onEnvironmental searches and Desktop Reportshttp://environment.practicallaw.com/7-216-0451

Rural conveyancingRural conveyancing

All conveyancers know about searches and enquiries, don’t they? Take alook at this book, and maybe you won’t be so sure.Some properties need more than just the local, commons, Land Registry

and bankruptcy searches and standard Protocol enquiries, although even inthe most basic cases Russell Hewitson offers a guide, with a completeanalysis of the relevant forms, the issues the questions cover, and theappropriate circumstances in which to ask them.

It is when we come to the more esoteric that the book really comesinto its own. Part IV – the first three parts deal with general principles and“the usual” searches – contains chapters on no fewer than 17 differentcategories of less common searches of general application. With some,most practitioners will be familiar, but let’s not overlook railways, chancelrepairs, registered Enduring Powers of Attorney, corn rents (yes, they dostill exist), the register of SSSIs and, of course, agricultural credits.

Mining and industrial searches of various shapes and sizes are describedtogether with an indication of the geographical areas in which they will be

relevant. Coal is encountered reasonably regularly; tin,clay and limestone less so, and brine workings onlyby those used to buying in certain parts of Cheshire.Nevertheless all are thoroughly covered.

What is most impressive is that, while the bookwill act as an aide memoire or Noddy’s Guide to thosewho want it, it goes into greater examination of history and mechanics forthose with more time, inclination or need to read up.

In every case, there is a comprehensive indication of when the particularsearch will be needed and of how to go about getting it, with names,addresses and website details to hand.

This is the third edition of a book first pioneered by Frances Silverman,who needs no introduction to anyone who has ever laid hands on aconveyance or transfer. Russell Hewitson carries the torch clearly andconcisely for the next generation. It would make an ideal prize for a newly-qualified property lawyer, and at £49 it is excellent value. GDW

Conveyancing Searches and EnquiriesRussell Hewitson – Published by Jordans, 412pp. plus index and tables, price £49.00 + p&p

VIEW BOOK REVIEW BOOK REVIEW BOOK REVIEW BOOK REVIEW BOOK REVIEW BOOK REVIEW BOOK REVIEW BOOK REVIEW

10

STAMP DUTY LAND TAX“The hardest thing in theworld…” – an update onSDLT and PartnershipsAndrew Campbell, Consultant, Clarke Willmott, Bristol

According to Albert Einstein “the hardestthing in the world to understand is theincome tax.” Fortunately for him, Stamp

Duty Land Tax was not invented until nearly 50years after his death, otherwise he would surelyhave referred to SDLT instead.

One strong candidate for its nadir of obscurityis Part 3 of Sch.15 Finance Act 2003, which dealswith partnership transactions “to which specialprovisions apply”. “Special” in this context is asynonym for “Byzantine”.Finance Act 2006For many partnership businesses, the FinanceAct 2006 contained good news, as trailed inThe Bulletin in the Spring of last year (Issue 44).Since 19th July 2006, a transfer of a partnershipshare is now only treated as a chargeabletransaction involving a partnership’s realproperty if the partnership is a property-investment partnership; known in SDLT-speakas a PIP.

A PIP’s “… sole or main activity is investingor dealing in chargeable interests (whether ornot that activity involves the carrying out ofconstruction operations on the land in question)”.Many farming and other agri-businesspartnerships will therefore no longer be caughtby the Para.14 charge deeming transfers ofpartnership shares to be land transactions inrespect of the partnership’s estates or interestsin land.

A transfer of a partnership share will usuallybe effected by variation of the partnershipagreement or by making a new partnershipagreement in substitution for the old one. If,as a result, new trustees of partnership propertyneed to be appointed, HMRC accepts that theappointment is a transaction for no consideration,for which an SDLT60 self-certificate can be filedat the Land Registry.Incorporating the partnershipbusinessThe other good news on partnerships in veryinformal. Many businesses start as partnerships,but grow to the point where partnership is nolonger the appropriate ownership or managementstructure, at which juncture they are incorporated.

The consequent transfer of the partnershipproperty from the partners to the companyappears to be taxable under two differentprovisions with two very different results. Oneis S.53 FA2003, headed “deemed market valuewhere transaction involves connected company”;and the other is Para.18 of Sch.15, the so-calledpartnership “exit charge”.

Section 53 FA2003 applies where thepurchaser is a company and either the vendoris connected with it or the consideration includesthe issue or transfer of shares in a companyconnected with the vendor. If S.53 applies, theconsideration is treated as being not less thanthe market value of the property, regardlessof whatever is said in the actual transactiondocuments.

Suppose, for example, that Oliver, Ed andMike are equal partners in a business sellingdairy products direct to the public. It is sosuccessful that they decide to incorporate itin to a company, Grange Farm Dairies Ltd, inwhich each owns one third of the shares. Thecompany purchaser is controlled by all threeindividual partners, so they are “connected”with it, under the combined effect of S.839 andS.416 Income and Corporation Taxes Act 1988.

Were S.53 to apply, the company wouldhave an SDLT liability on the land transfer basedon the market value of the land in question;unless unusually the price paid by the companyexceeded market value, in which event the higherfigure would apply.

Happily, HMRC has confirmed in informalcorrespondence, although not yet in anygenerally published guidance, that S.53FA2003 does not apply in this circumstance.Sch.15 para.18 applies instead.

Para.18 is designed to tax the extent towhich economic value in land has shifted outsidethe combined net of the owning partners plusthose “connected” with them. The para.18 chargeapplies therefore to a percentage of market value.That percentage is our old friend, the formula“MV = (100 – SLP)”.

SLP is the “sum of the lower proportions”.Shortage of space prevents an explanation ofthe five steps taken by para.20 to establish SLP;but the result in the above example is an SLP of

100. This is because under S.839(7) ICTA 1988,a number of persons acting together to control acompany are connected with each other inrelation to the company and with the company.

If the SLP is 100, then 100 – 100 = zero.Thus zero percent of the market value is broughtinto charge. In this context, an SDLT1 mustbe used, even though there’s no consideration,because Sch.15 para.25 provides that “noconsideration” exemption does not applyto Sch.15 transactions. Since the transaction isnot exempt under Sch.3, merely one for which noSDLT is due, a formal SDLT1 return is required.Pre-Budget Report changes –December 2006However as a result of the legislative changesbrought in on 6th December 2006, this treatmentnow only works in respect of partners whoare individuals rather than companies. In theexample, if one were to replace Ed with Ed’sDairy Consultants Ltd, there would now be acharge to SDLT. In order to calculate SLP onemust identify persons who are “correspondingpartners”.

As from 2.00 p.m. on 6th December 2006,companies can no longer be correspondingpartners unless they are also a “relevant owner”,which in this case is Grange Farm Dairy Ltd.They can no longer be corresponding partnersmerely by being connected with a relevant owner.In this case, the result is that the SLP is reducedto 66.66%. Thus, the deemed considerationwould be 33.34% of the market value.Changes to the Entry ChargeThe same new rule applies to the “entry” chargeunder Sch.15 para.10. If Jill were to transfer landto a honey-producing partnership of Jill, her sonDavid and her daughter-in-law Ruth (David’swife); all of Jill, David and Ruth would becorresponding partners and the SLP wouldbe 100, giving rise once again to a deemedconsideration of nil.

But if we were to replace Ruth with BowmanHoney Ltd, a company wholly controlled by Jilland David, then although the pre-6th Decemberrules would have produced the same nil result;the new rules will produce a deemed chargeable

11

Stamp duty land taxStamp duty land taxconsideration equal to Bowman Honey’s income-sharing proportion in the partnership.

These new rules are adjusted where the“relevant owner” under the entry or exit chargeis itself a company and another company is thesame group would have been a correspondingpartner under the pre-6th December rules. Ineffect, the tax due on proportion of market valuethat has become chargeable as a result of thenew rules is treated as eligible for group relief,but subject to clawback if the transferee companyde-groups in at a time and in a way that resultsin withdrawal of the relief.What is partnership property?Advice given in Paragraph SDLTM 35100 ofthe draft SDLT Manual Chapter on partnershipshas proved particularly problematic. It says:“… property held by one of the partners andused for the purposes of the partnershipbusiness is partnership property (seeFA03/SCH15/PARA34(1) …”.

HMRC has, until very recently, taken the viewthat if, for example, Oliver owns the freehold ofGrange Farm and permits the partnership (inwhich the partners are himself, Ed and Mike)to use it for the purposes of the partnership’sdairy business, this somehow operates for SDLTpurposes as an implied transfer of Oliver’sfreehold to the partnership.

However, HMRC now accepts that this goesfurther than para.34(1) of Sch.15 allows, so longas the identity of the owners does not preciselymatch the identity of the partners. Apparentlyrevised guidance will be issued. This is goodnews for practitioners and those involved inpartnership businesses, particularly thoseinvolving Harrison-Broadley v Smith1-typearrangements.

Welcome as this revised view of para.34(1)’smeaning is, it leaves open the question of whathappens when the identity of the owners andthose of the partners does coincide; even thoughthis may be a less than common circumstance.

Suppose, for example, three siblings calledPip, Josh and Ben inherit freehold land by atransfer from executors in June 2005. No SDLTis due because the transfer is exempt underSch.3 para.3A. They let the land out on grazingagreements for a time, but in April 2007 theystart their own sheep farming business inpartnership on it.

In September 2007, Josh gives his sharein the property (not the partnership) to his sonDavid. David is content to allow the partnershipto go on using the land. There either is or is nota transfer to new trustees to reflect this, but thisought not to make the slightest difference in

SDLT terms. The first lambing season is enoughto convince Pip that sheep farming is not for her.She retires from the partnership in April 2008. Butboth she and David, as well as Ben, are contentto allow Josh and Ben to go on using the land inpartnership for the sheep farming business.Setting up the partnershipHMRC appears to consider that, because Pip,Josh and Ben are both the owners and thepartners using the land, there is a notional landtransaction in April 2007, consisting of thedeemed transfer of the freehold to the partners.In the example, no SDLT is due because, underthe para.10 entry charge, the SLP will be 100 andthe deemed market value will be nil. However, anSDLT1 is required because of para.25.

How many lay people can be expected torealise that an important tax event has notionallyoccurred for which a return must be filed, eventhough no tax is payable? Failure to file such areturn promptly will give rise to penalties.

In para.34(1) cases involving precisecoincidence, one suspects there will never bean actual para.10 liability, because the SLP willalways equal 100. However, as we shall shortlysee, a zero SDLT charge on the formation of thepartnership is far from the end of the story.The Gift to DavidIs the gift to David in September 2007:(A) an ordinary gift by Josh of his equity in the

freehold; or(B) a para.18 disposal by the partnership of

Josh’s share in the land; or(C) a para.18 disposal of the entire freehold by

the partnership to Pip, David and Ben(because the coincidence between the identityof the owners and that of the partner usershas ceased)?

If HMRC’s view that the June 2007 events giverise to a deemed transfer of the freehold iscorrect, then logically it ought to follow that theSeptember 2007 events have the reverse effectand analysis (C) will be correct.

However, this has a very expensiveconsequence. Pip, David and Ben now havea deemed para.18 exit charge on which, becauseof para.21, their SLP is nil.

Para.21’s objective is generally thoughtto have been the prevention of tax avoidanceinvolving partnership schemes during thetransition between Stamp Duty and SDLT. Itsays that the SLP for any para.18 exit transactionwhere no Stamp Duty or SDLT was paid onthe transfer in to the partnership is always nil,regardless of what Sch.15 says elsewhere.

In effect, Para. 21 appears to provide that, ifthe partners did not pay tax when they acquiredthe land, they must pay SDLT when it ceases tobe partnership land. This is particularly hard onthose who “innocently” acquire land by atransaction on which no SDLT is payable, e.g. byinheritance or other gift.

Accordingly Pip, David and Ben have anSDLT liability based on the entire market valueof the whole of the land, even though only a thirdof it has been actually been given away. Again itseems that HMRC expects lay persons to havean unrealistically profound knowledge of Sch.15.

Even if Josh and David get a conveyancer toadvise on the gift, it may not come to light thatthe land is used by a partnership. Josh, ignorantof its significance, may never mention the fact.The conveyancer may have no cause to ask.Clearly an SDLT1 return ought to be filed and theSDLT paid within 30 days of the effective date ofthe deemed para.18 exit transaction. It seemsthat, in this example, that is the date of the gift.Josh’s divorceAlternatively, what happens if we replace the giftby Josh with a transfer to Josh’s ex-wife as partof a divorce settlement?

Were Sch.15 not in point, divorce transactionexemption under Sch.3 para.3 would apply. If thedeemed transaction for SDLT purposes is not onebetween “one party to a marriage and the other”,but rather one between partners in a commerciala partnership and a divorcing spouse of oneof them, one presumes that para.3 divorceexemption cannot apply. HMRC has not yetgiven its view on this issue.

If this analysis is correct there is again adeemed exit transaction in respect of which theacquiring parties are Pip, Josh’s ex-wife and Ben.But once again para.21 intervenes to deprive allcorresponding partners involved of their “lowerproportions”. Once again there is an SDLT chargeon the entire market value.

Those advising Josh’s wife will probably bevery surprised to hear that the Court-orderedequity transfer is not exempt under Sch.3 para.3.Instead, their client is jointly and severally liablefor SDLT on 100% of the market value of theproperty in which she has been awarded aone third share! Pip and Ben would be equallyastonished when they learn that their brother’smatrimonial difficulties have lumbered them bothwith joint and several liability for SDLT on 100%of the market value of the land.Retirement from the partnershipSuppose neither the gift nor the divorce happen,but Pip’s retirement in 2008 does. Presumably

12

Stamp duty land taxStamp duty land taxthe analysis at (C) above applies. Again theoperation of para.21 gives rise to an SDLT liabilityon the entire market value.

The same would seem to apply if the firstlambing season puts all three of them all off andthe partnership is dissolved in April 2008 and itsability to use the land comes to an end. To incura full SDLT liability on the entire market value ofthe land seems a disproportionate and unfair wayof rubbing salt into the wounds caused by thefailure of their sheep farming enterprise.

There are many permutations of circumstancein which this problem may arise unexpectedly.Suppose Pip had been cautious in 2007, andmerely accepted a job as a paid employee ofJosh and Ben’s partnership. Fired withenthusiasm after her first lambing season,she throws caution to the winds and acceptstheir offer of partnership. The baleful coincidenceof both owners and partner users arises as soonas she does so.What to do about para.21?Para.21 means one has to take care to avoidallowing para.34 (1) to apply unless all the

consequences have been carefully considered.But what else could the three siblings have donein June 2007, had they been aware of the risksposed by paras.21 and 34(1)?1. They could not have granted the partnership

a lease, because a lease by property ownersto themselves as partners is a legal nullity(Rye v Rye2).

2. They could have formed a company toundertake the business and leased theproperty to it, but this might have had manyother unpalatable consequences.

3. If Josh had given his equity to David beforethe partnership started using the land ratherthan after, the disparity of identity betweenthe owners and the partners would haveprevented the problem arising.

4. They might have set matters up so that therewas a disparity of identity between the ownersand the partners, for example by making oneof the partners a salaried employee ratherthan a partner.

5. They might have granted a lease of the landto a suitable stooge (for example an off-the-shelf company) and then persuaded the

stooge to lease the land back to thepartnership.

Compelling UK businesses with no avoidancemotive whatsoever to resort to such unnecessarymachinations, merely to avoid falling foul of anti-avoidance legislation that was not intended tocatch the transaction is question is a counter-productive waste of time and money.

Of course, all of strategies 2 to 5 above maynow fall foul of S.75A FA2003, the new generalanti-avoidance rule introduced at 2.00 p.m. on6th December 2006, several hours before mosttax-payers and their advisers could actually readit. But that, as they say, is another story.

Einstein also said “Things should be made assimple as possible, but not any simpler.” Let ushope the Treasury can eventually be persuadedto amend Sch.15 and S.75A so as to accord withhis admirable view.

1 [1964] 1 All ER 8672 [1962] 1 All ER 146

Whilst the fiasco of the implementation of SPS in England continuesto hamper its smooth running after all this time and the authorities

lead us to believe that it will be 2008 at least before it is completelysorted, two reports published last month throw some light on whatwent wrong and what might be done to improve matters in the future.

Much of the content is unsurprising, I am sure, to Members of ALA,as close as we all have been to the disaster that has befallen our clientsand, in many cases, our friends.

The investigation by the House of Commons Environment Food andRural Affairs committee began as soon as it became apparent that targetsfor payment of 2005 monies would not be met. Its principal conclusionwas that the Rural Payments Agency “was required to do too much intoo little time”.

That rather obvious statement is bolstered by a thorough analysis ofsome 306 pages of evidence dealing with the matter from the verybeginning: the choice of a “complex and high risk” dynamic hybridscheme; the failure to learn the lessons of previous failures in relationto new IT projects; the inappropriate ‘task-based’ approach which“hindered the Agency’s own understanding of the degree of progressit was making in dealing with claims”.

It criticises heavily the lack of accountability in public office of some ofthose responsible for the failure. Johnston McNeill, RPA Chief Executiveat the time, has, after a prolonged period of ‘gardening leave’, finallygone, but former Secretary of State Margaret Beckett, PermanentSecretary Sir Brian Bender and DG of Sustainable Farming AndyLebrecht have been singled out as having “moved on unscathed orstayed in post”.

“A culture where ministers and senior officials can preside over failureof this magnitude and not be held personally accountable creates aserious risk of further failures in public service delivery.” Not only that:it is dishonourable and plain wrong!

The second report, by David Hunter, focuses less on what went wrongas on what should happen with RPA in the future. Mr. Hunter was one ofthe senior officials within DEFRA during the implementation process andconvened the stakeholder group which included RPA and which was themain interface between the authorities and the industry.

His principal conclusion is that, for the time being at least, the RPAboat has been rocked sufficiently not to risk any further structural changeswhich might distract from the principal objective of stabilising SPS by2008, which includes the rebuilding of the badly damaged relationshipbetween the Agency and its customers, the farmers.

Mr. Hunter is especially critical of the lack of empathy on the onehand, between DEFRA and RPA and, on the other, between RPA and thefarming community. It is clear to him that those who made the policy hadinsufficient idea of how it would be delivered, and those who weredelivering it knew not enough about its goals.

The welcome recommendation that more effort should be put intoadvising farmers on how to comply rather than beating them up for notdoing so is one that we and many others urged him to make.

Above all, it is clear that the Agency was too much an island andneeds to communicate more, both with its masters in DEFRA and itscustomers on the ground. As the old BT adverts had it, it’s good to talk!

For those who wish to read further, I have posted copies of bothreports to the Members’ Section of the ALA website. GDW

Lack of official communication

13

SCOTTISH PERSPECTIVEComplusory purchaseand compensation inScotlandOdell Milne, Brodies LLP, Edinburgh

Landowners across Scotland are facedtoday by the threat of compulsoryacquisition of land on a scale that has not

been seen for 100 years. Since the constructionof Scotland’s railways most landowners have onlyfaced occasional piecemeal compulsoryacquisition in connection with road schemes andlocal authority development.

However, over the last few years majorinfrastructure projects have been promoted byScottish Transport, Local Authorities and NetworkRail. This means that large scale compulsoryacquisition of land is again a reality for manylandowners.

Although the recent railway schemes – whichinclude the Stirling–Alloa–Kincardine railway, theAirdrie to Bathgate railway, the Borders orWaverley railway, the Edinburgh Air Rail Link andthe Glasgow Rail Link – may be more relevant tolandowners in Scotland’s central belt, roadschemes such as the Aberdeen peripheral routemean that compulsory purchase may affect thosein many parts of Scotland.

If a landowner faces the threat of compulsorypurchase, what should he or she do? The optionsmay depend upon the procedure being used forthe compulsory acquisition. Recently the majorScottish railway projects have proceeded by useof the Private Bill procedure in the ScottishParliament.Early objectionsPerhaps the most important point for landownersto note in the context of compulsory acquisitionunder a Private Bill is that the opportunity toobject to the compulsory acquisition of land arisesat a very early stage in the proceedings. Thatmay seem very obvious but many people do notappreciate that by the time a Private Bill becomeslaw, there is no further opportunity to object to theactual acquisition of land or rights in or over it(although it is, of course, still possible to claimcompensation).

This means that if a landowner receives anotice of the introduction to the ScottishParliament of a Private Bill relating to a majorinfrastructure project and that landowner has areason for wishing to try to stop the compulsoryacquisition entirely or, perhaps wants to suggestan alternative route or slight diversion, thelandowner must lodge an objection to the PrivateBill within the 60-day period following receipt of aNotice of its introduction.

It may seem to parties receiving a noticeunder a Private Bill that the objection periodrelates to more general matters such as objectingto the proposed railway line in principle. However,this is most definitely not the case and althoughthe objection period allows for objections to thewhole scheme, it also provides the onlyopportunity for objection to any acquisition of landwhich is to be acquired for the scheme.Reasons and counter-proposalsAn objector to a Private Bill will be heard by anAssessor who will prepare a report for theParliamentary Committee. It may be that theParliamentary Committee responsible for thePrivate Bill will call for further evidence. It isessential that in lodging the objection and ingiving evidence at the Assessor’s Hearing, thelandowner clearly expresses the reason for theobjection and any counter-proposal.

For example, if a landowner has planningpermission for development, then a copy of theplanning permission should be lodged. If alandowner is conscious that a scheme will resultin severance of one part of that landowner’s landfrom another, evidence of the severance shouldbe provided.

In the event of severance, the promoter of thescheme is not under any obligation to provide anaccommodation bridge and may choose to paycompensation to the objector. However, it is morelikely that an accommodation bridge can benegotiated if the need for that bridge is madeknown to the promoter of the scheme at an earlydate and can be incorporated in the promoter’sdesign.

If the compulsory acquisition proceeds by wayof the Compulsory Purchase Order (CPO)

procedure (which is likely to be the case for aroads project promoted by Transport Scotland ora Local Authority), then the opportunity forobjecting arises at the stage when a landownerreceives a notice that it is intended to make aCPO. The grounds of objection are similar in anycompulsory purchase situation and again there isa time limit for lodging objections. If an objectionis not answered to the satisfaction of thelandowner, the Scottish Ministers may call for apublic inquiry to be held.Freedom of expressionThere is no particular style of objection nor arethere any statutorily prescribed grounds. Themost common grounds are that there is no needfor the scheme for which the land is beingacquired or that the importance of retaining theland in its present use should override thepurpose for which it is proposed that the land beacquired.

Another ground might be that the schemeneed not be implemented in the way which isproposed and that a different method – perhapsusing other land – would better serve thescheme’s purpose. An objector may simply wishthere to be a slight adjustment to the boundary of

Enquiriesshould be made asearly as possible toascertain the likelyeffect of theproposed schemeon the interest ofthe landowner orthe tenant

“

”

14

land to be acquired or a slight relocation and inthose circumstances an objection with analternative proposal may result in a satisfactoryresolution for both parties.

If an objector is willing to implement thescheme without compulsory acquisition, he mayargue that compulsory acquisition is notnecessary. Finally he may seek to argue that abetter alternative site exists where the schemecould be implemented. If that is so, then he mustidentify the alternative site.

From the landowner’s point of view the earliera clear objection stating the grounds for objectionand any alternative proposal can be put forward,the better the chances of achieving a resolutionwith the party promoting the scheme.

However, if a landowner has missed theobjection period, it may still be possible tonegotiate an agreement with the acquiringauthority, particularly if all that is required is aslight variation of boundary or an alternativelocation for a works or construction compound.

In order to try to minimise loss, maximise thecompensation received and speed matters alongit is essential that those threatened withcompulsory acquisition contact a solicitor and/oragent with experience in compulsory purchase asearly as possible. One of the reasons why this isparticularly important for rural landowners isbecause of the special legal provisions relating toagricultural land.Additional landCompulsory purchase legislation provides that aparty from whom agricultural land is to beacquired may seek to force the acquiringauthority to take more land than it intends. This isonly possible where the acquisition will result inthe land which remains ceasing to be viable asan agricultural unit. In these circumstances whena party with an interest in agricultural landreceives a notice, he may serve a counter-noticeclaiming that the land which remains is notreasonably capable of being farmed by itself oralong with other land belonging to him. Such acounter-notice must be served within two monthsof the date of service of a notice to treat or noticeof a general vesting declaration.

The landowner must prove that the landremaining is incapable of being farmed. Anacquiring authority may accept a counter-noticeand acquire all the landowner’s land but if it doesnot do so within two months, then either partymay refer the matter to the Lands Tribunal forScotland. If the Lands Tribunal upholds thelandowner’s claim that the remaining land is notreasonably capable of being farmed, then the

acquiring authority must acquire all the landcontained in the counter-notice.

Unfortunately, the relevant legislativeprovisions are very complicated, particularlywhere there are agricultural landlord’s andtenant’s interests involved. It is therefore essentialthat there is clear understanding of the landlord’sand tenant’s entitlements before a counter-noticeis served.Three questions to answer ...Given the very short timescale for service of thecounter-notice and the fact that, if it is not servedwithin the relevant period, it cannot be servedlater, it is essential that a landowner withagricultural land, whether tenanted or not, facedwith compulsory purchase seeks advice earlywith regard to his or her options.

If however land is to be acquired compulsorily,the landowner must consider his claim forcompensation.

From a landowner’s point of view there arethree basic questions to answer. These are:l For what can you claim compensation? l How much will you get?l When will you get it?Unfortunately, there is no easy answer to the firstof these questions. In so far as the other two areconcerned the answers are more predictable.From a landowner’s point of view it is very likelythat matters will take years rather than months toresolve and that a claimant who has had propertycompulsorily acquired will be worse off at the endof the day.

Parties should be aware that the entitlementto compensation in compulsory purchasesituations is enshrined in the law. It is notnecessary to object in order to retain theentitlement to claim compensation.... and three principlesof compensationThere are three basic principles of compensationin a compulsory purchase situation. The mostimportant of these is the principle of ‘financialequivalence’. This principle recognises that thepurpose of compensation in compulsory purchasesituations is to place the claimant in the sameposition as he would have been in if thecompulsory acquisition had not taken place.

The second principle provides that there mustbe no ‘double counting’ – for example if a claim ismade for agricultural land on the basis of itsdevelopment potential for residential purposes,then there cannot be a claim for disturbance to anexisting farming business at the same time.

Finally, any person claiming compensation incompulsory purchase situations is subject to a

general duty to act reasonably to mitigatehis losses.

There is not room in this article to considercompulsory purchase compensation in detail butthere are four main heads of claim.

These are:l a claim for the value (price) of the land taken;l a claim for disturbance arising as a result of

the claimant’s displacement from the landacquired;

l a claim for ‘injurious affection’ which is wherethere has been depreciation in the value ofthe land retained by the claimant as a result ofthe construction or use of the works for whichthe land was acquired; and

l a claim for severance which arises wherepart only of a parcel of land belonging to oneowner is taken and another area of land is‘cut off’.

Finally, turning to the practical aspects of claimsfor compensation in compulsory purchasesituations, the first point to note is that alandowner’s surveyor’s reasonable fees willgenerally be met by the acquiring authority. Thelandowner should get written confirmation of thisand appoint a surveyor as soon as possible sothat he can, if appropriate, negotiateaccommodation works. These are works whosesole purpose is to mitigate the effect of thescheme on the landowner’s remaining land andthey could include new roads or accesses, soundproofing, tree planting, etc.

However, the landowner should be aware thatfees incurred in simply opposing the scheme areunlikely to be met by the acquiring authority. It isalso likely that the acquiring authority will expectthe landowner to include surveyors’ and solicitors’fees in the claim for compensation and will not bekeen to pay these ‘up front’. Paramount need for early actionIn summary, if there is one thing which alandowner or tenant should remember whenfaced with compulsory purchase, it is that if hereceives a notice which mentions the possibility ofcompulsory acquisition, enquiries should be madeas early as possible to ascertain the likely effectof the proposed scheme on that landowner’s ortenant’s interest.

Depending on the result of their inspection thelandowner or tenant can decide whether to objector not.

If the scheme goes ahead and a notice ofintention to acquire land is received, thelandowner must act quickly to ensure that hedoes not neglect the opportunity to serve acounter-notice if appropriate.

Scottish perspectiveScottish perspective

Live & LearnALA Student/Training Section

15

Given that the Agricultural Holdings Act1986 has not applied to new tenanciesfor nearly 12 years (except in very limited

circumstances), it is surprising how many peoplestill present agreements for grazing or mowingclearly drawn with that Act in mind.

The ‘statutory magic’ – whereby most lettingsand licences were converted into full-blown year-to-year tenancies which would, to all intents andpurposes, last for ever – no longer applies andthe need to confine a grazing agreement to“some specified season of the year”1 is nowirrelevant.

So what modern considerations should adraftsman be thinking of in the context or grazingor mowing?What type of contract?Types of agreement fall basically into threecategories: tenancy, licence and, increasingly,profit à prendre.

The case usually cited to resolve theconfusion between tenancies and licences isStreet v Mountford2. Strictly speaking, that caseis authority only for the proposition that, whereparties have entered into a written contract whichprovides the three principal ingredients of atenancy – exclusive possession at a rent for aterm – they may not, merely by labelling it alicence, turn it into anything but a tenancy.

Subsequent cases, however, have subdividedthe issues into sections: the ‘moving in’ cases,where a person takes up occupation inanticipation of concluding a written agreement3;and the ‘staying on’ cases, where the term of awritten contract comes to an end but the tenantremains in possession4.

Political considerations, such as a desire toavoid bringing the arrangement under statutoryprotection, and a more purposive approach toconsideration of the motives behind thearrangement have watered down the strictness

of the ‘exclusive possession + rent + term =tenancy’ formula, but it remains relevantnonetheless.

A licence, on the other hand, is, at its mostbasic, a permission granted by a person with aninterest in land to another to come onto that landfor a stated purpose. On the nemo dat principle5,the grantor must have an interest greater thanthe licence he proposes give, but that is theonly limitation.

The consequences of inadvertently creating atenancy may no longer be as severe as before1995 in terms of security of tenure, but there are,as we shall see, other reasons why the distinctionremains important.

A profit à prendre is a wholly different form ofincorporeal hereditament from the tenancy andthe licence. Broadly, it is a right given to someoneto take something from land which is capable ofbeing sold from it; in this context, a crop of grass.

These days, the parties’ choice of agreementcan be determined by factors quite unrelated tothe land in question or to the grazing itself: forexample, taxation, the Single Payment Scheme(SPS), animal movement regulations, orconsequences upon milk quota holdings. Notleast is the attitude of the landowner, who mayfarm nearby and want a supervisory role, or mayindeed have his own contemporaneous need forthe land.Income taxThe income tax treatment may depend uponwhether the grantor is or is not a farmer,according to S.876 Income Tax (Trading andOther Income) Act 2005: farming is “theoccupation of land wholly or mainly for thepurposes of husbandry but does not includemarket gardening”. If the grantor is a farmer, theincome will probably be taxed under Pt.2 or Pt.5of the 2005 Act; if not, then under Pt.3(successors to Sch.D Case I; Sch.D Case VI; andSch.A respectively).

Whether the grantor is a farmer is a questionof fact in each case, but the decision may beaffected by whether or not the grazier hasexclusive possession. The principal authority on

the point is CIR v Forsyth Grant6, where thedecision was based on the grantor’s havingestablished, fertilised and maintained the grassand used it himself or given others the rightto do so.

Before 1995, it was generally assumed thatwhere the agreement was for more than a year,the grazier would be the farmer for tax purposes,but in other cases the grantor would remain thefarmer and be taxed under Sch.D.

Nowadays, there is no technical reason whygrazing agreements may not be made for longerthan a year. However, there is no authority forthe proposition that a grantor may be consideredthe farmer in respect of longer terms and noindication of the current view of H.M. Revenue& Customs on the point. Care needs to be taken.Capital Gains TaxFrom the point of view of capital gains tax, taperrelief is most significant. Business assets aretreated much more favourably than others: thechargeable gain is reduced by 75% after twoyears for the former, and only 40% after 10 forthe latter.

A business asset is one used by thetaxpayer’s business, land let to a non-quotedtrading company and land let to individuals fortrading purposes. This last seems to includefarmland so that there would be no difference inCGT treatment between a tenancy in favour of agrazier for his business and a licence where thelandowner was in the business of farming.

No agreement, of whatever nature, with anon-business user – recreational equine use, forexample – would qualify.

On the other hand, rollover relief from CGTdoes require the taxpayer to be carrying on abusiness and to be using the asset (and itsreplacement) in that business.Inheritance TaxThe nature of a grazing agreement can also bearupon the IHT treatment of the land itself and uponrelated land such as farmhouses and cottages.

A person’s interest in a business is in mostcases entirely relievable under the business

Live&LearnKeeping the grass downGeoff Whittaker, West Mersea

16

Live & LearnLive&Learnproperty relief (BPR) provisions provided it hasbeen held for two years (unless it falls within therules relating to replacement assets) and is notcomprised wholly or mainly of investments.

Land subject to a tenancy would normally betreated as an investment asset, unless the lettingis ancillary to in-hand business interests. This willbe a question of fact in each case: broadly, thegreater the proportion of the lettings, the morechance that they will be disallowed.

The leading case on the point is Farmer vIRC7. A farmer’s lettings for non-agriculturalactivities were treated as a single business anddealt with in the same set of accounts as thefarming. The Revenue disallowed the incomefrom the lettings but the Special Commissionerdecided that, taken as a whole and looking alsoat the relative time and labour commitment, thefarming business still predominated and reliefwas allowed on the entirety.

More recently, Stedman v IRC8 concluded thatthe provision of services inherent in the runningof a residential caravan park outweighed themere letting of the sites and permitted BPR. Onthe other hand, where income from lettingssubsidised other business activity, relief wasrefused9. The line between allowance and refusalis clearly difficult to draw.

To qualify for agricultural property relief (APR),the taxpayer first of all must have agriculturalland or pasture. If that is so, other assets maybe brought in as well: ancillary woodland andlivestock buildings occupied with it, andfarmhouses, cottages and farm buildingswhere they are “of a character appropriate”to the land10. The grazing arrangements maytherefore impact upon the APR treatment ofsuch other assets.

With considerable effort on the part of theCountry Land & Business Association, it andother industry stakeholders have persuaded theauthorities that a properly drawn profit à prendrewill permit the grantor to remain in occupation asa farmer so as to relieve the land the subject of itfrom inheritance tax under APR at the same timeas supporting any associated ancillary land orbuildings in qualifying for relief.Single Payment SchemeThe main issue under SPS is the application ofthe ten-month rule, under which the claimantmust have the land “at his disposal” for tenmonths of the year11. In England, that period maycommence at any time of the claimant’s choosingbetween 1st October in the year previous to theclaim and 30th April of that year; in default of hischoice, it begins on 1st February.

The guidance produced hitherto has beeninconclusive as to the criteria by which a claimantcan judge whether land is at his disposal. Matterssuch as actual and predominant uses; identifyingthe person who takes the risks and the profitand who controls eligible uses and ensurescross compliance; and the terms of anyagreement under which he occupies, includingduration, rights of termination and permitted uses,are all relevant.

A tenancy clearly will give the tenant control ofthe land, subject to its terms, and the exclusivityof possession will enable the tenant todemonstrate that the land is at his disposal.

A licence may also be adequate, althoughmuch will depend upon the drafting. Mostconventionally drawn licences will make it clearthat the grantor remains in possession andoccupation and the grantee merely has temporaryand limited rights; indeed, that may well be thepoint of choosing a licence as the vehicle.

But it is not yet clear whether that necessarilyprecludes the grantee from claiming that theland is “at his disposal” within the meaning ofArt.44(3). The very novelty of the phrase seemsdesigned to be less rigid than forms of occupationhitherto known to our law and the guiding legalphilosophy of permissive flexibility in mostcontinental legal systems would suggest thatthe correct official approach should be elastic.Until there is a test case, however, the matterremains uncertain.Cross complianceWhatever the form of the agreement, there areseveral areas which require special attention onthe part of the draftsman, of which crosscompliance is one of the most important.

Breaches of cross compliance will lead topenalties on the SPS claimant. The agreementmust ensure that the burden of those penaltiesfalls on him who is in a position to prevent them.

Various regulations control the activitiesof the grazier as regards animal movements.A labyrinthine tangle of rules govern timing,licensing and reporting of animals, withdifferent provisions according the type ofanimal concerned.

Under certain circumstances, DEFRA mayrecord sets of separate premises as “soleoccupancy groups”. This applies where they are“linked in terms of their control” and has the effectthat movement of animals between premiseswithin the group is permitted where it wouldotherwise be an offence.

A grantor should be aware of precisely theanimals under the control of the proposed grazier.It would be wise to consider whether the grazierought to bring the land within his sole occupancygroup. In any case, the contract needs to bedrawn to ensure that the grazier complies withall animal movement requirements andindemnifies the grantor against theconsequences of any failure.

The draftsman will also need to be alert tothe responsibilities imposed under the variousDirectives and regulations dealing withidentification and welfare of livestock andthe control of weeds.

Different provisions regarding identificationapply in the case of sheep and goats, cattle andpigs, and all form part of the suite of crosscompliance requirements. New for 2007 iscompliance with separate Directives on thewelfare specifically of calves and pigs, and offarm animals in general. Once again, provisionswill need to be drawn to ensure that liability endsup where it belongs.

Liability for control of weeds derives from twomain sources: the Weeds Act 1959 and theWildlife and Countryside Act 1981. The formerrequires notification of the presence of “injuriousweeds”, namely common ragwort, spear thistle,creeping (or field) thistle, curled dock andbroadleaved dock; the latter creates offences inrelation to giant hogweed and Japaneseknotweed. Cross compliance rules applyto all of those plus Himalayan balsam andrhododendrons. See previous commentsregarding the duties of a draftsman.

Special considerations arise in respect ofdairy farmers on account of holdings of milkquota. The point has diminished in generalimportance lately since most transfers of quotanowadays take place on a without-land basis, butoccupation of land for more than 10 months mayinadvertently result in the transfer of milk quota

The parties’ choice of agreementcan be determined by factors quiteunrelated to the land in questionor to the grazing itself

“”

17

Live & LearnLive&Learn

due to ‘massaging’. Appropriate provisions shouldbe added to the contract to avoid it.HorsesConfusion is rife in respect of the use of land forhorses and at least part of it stems from the factthat, whilst a horse is a horse is a horse, thelegal categorisation of agreements involving itis nothing like as simple. As far as land lawis concerned, the regime under which theagreement will fall depends upon whether theuse is agricultural or business, or perhaps bothor neither; other considerations again apply inrelation to taxation.

What is agricultural use also varies accordingto context, because of the several definitionsaccording to whether one speaks of the SPS,taxation, tenancy law, rating or planning.

So far as concerns the letting of land – and byanalogy the licensing of the use of land – thedefinition in S.38 Agricultural Tenancies Act 1995is perhaps the most useful. “Agriculture,” it says,“includes horticulture, fruit growing, seed growing,dairy farming and livestock breeding and keeping,the use of land as grazing land, meadow land,osier land, market gardens and nursery grounds,and the use of land for woodlands where that useis ancillary to the farming of land for otheragricultural purposes.” Note, it “includes”, in thesame way as its predecessor in the AgriculturalHoldings Act 1986 did; thus, there areconceivably activities beyond those specifiedwhich would be agriculture.

The Act goes on to define “livestock” asincluding “any creature kept for the production offood, wool, skins or fur or for the purpose of itsuse in the farming of land”. Thus, horses will belivestock only in the limited circumstances ofbeing farmed for food – there are those who

export to the Continental meat market – or usedat the plough or for haulage. Otherwise, horsesare not livestock and thus their keeping isgenerally not agriculture.

But “the use of land for grazing” is within thedefinition of agriculture. So where the land islet in order for it to be grazed, it matters notwhat type of animal is used for the purpose.Occupation by horses under such anarrangement would be agricultural.

Then come questions of primary purpose. Ifthe letting is of a livery stable, for example, witha paddock attached, then it can fairly be said thatthe primary purpose is the livery and the grazingof the paddock is merely incidental. But what ofthe livery stable owned freehold – or, indeed, let –with the grazing taken under a separateagreement with a different grantor? Arguably thegrazing let would then be an agricultural tenancy,for that would be its primary – its only – purpose.

The easier question will be whether thehorses are kept for business. That is one of factin each case.

Beware, in the taxation context, the case ofWheatley v IRC12, a case that dealt with APRfrom IHT. It decided that for land used solely forgrazing horses to be “occupied for the purposesof agriculture” within S.117 Inheritance Tax Act1984, the horses had to have a connectionwith agriculture.

In the context of landlord and tenant:l a letting of land for the commercial grazing of

horses, pure and simple and without any otheractivity, can be agricultural, and would be afarm business tenancy;

l a letting for other equine business purposeswith the grazing ancillary thereto would almostcertainly not be agricultural and would thus begoverned by the Landlord and Tenant Act1954, Part II;

l a letting of land to provide accommodation fora pet pony would be neither agricultural norbusiness and would be a common lawtenancy; the grazing activity might well beagricultural, but the absence of business usewould take it outside the 1995 Act.

None of those considerations applies in the caseof a licence, so long as it is not a sham or cannototherwise be deemed a tenancy.

1 S.2(3)(a) Agricultural Holdings Act 19862 [1985] 1 AC 809, HL3 E.g. Javad v Aqil [1991] 1 WLR 1007, CA;

Sopwith v Stuchbury (1985) 17 HLR 50, CA4 E.g. Burrows v Brent LBC [1996] 1 WLR

1448, HL, which introduced the concept of thetolerated trespasser; Newnham LBC vHawkins [2005] EWCA Civ 451; LambethLBC v O’Kane / Helena Housing Ltd. v Pinder[2005] EWCA Civ 1010

5 Nemo dat quod non habet – no-one can givea better title than he has

6 (1943) 25 TC 3697 [1999] SpC 2168 [2002] SC3001/029 Clark v HMRC [2005] SpC0050210 S.115(2) Inheritance Tax Act 198411 Art.44(3) of Regulation 1782/200312 [1998] STC (SCD) 60

There areseveral areaswhich require thedraftsman’s specialattention, of whichcross complianceis one of the mostimportant

“

”

Grazing Arrangements –Issues affecting land, livestockand horsesCAAV Numbered Publication 186

For those who wish to read more about thepoints made here in relation to grazing

arrangements, and others, the CAAV hasproduced a guide in its series of NumberedPublications.

No.186 replaces Nos.167 & 177, whichwere issued some time ago, and deals froma practical point of view with the issuesrelevant to putting together a deal for theuse of land by animals.

As well as the matters covered on thesepages, the booklet covers liability for

dangerous and straying animals, animalidentification and movement rules, diseasecontrol, and more.

Various specimen documents arealso included, with the usual caveat thata precedent should be no more than astarting point for a bespoke contract.

Copies (price £25 to non-members) canbe obtained direct from CAAV at 35 MarketPlace, Coleford, Gloucestershire, GL16 8AAor via its website at www.caav.org.uk

18

SI2006/3166(W291) = Diseases of Animals(Approved Disinfectants) (Amendment) (Wales)Order 2006 – amends the Diseases of Animals(Approved Disinfectants) Order 1978 (SI1978/32) –30th November 2006SI2006/3247 = Avian Influenza (H5N1 in Poultry)(England) Order 2006 – transposes variousCommission Decisions of December 2006 –30th December 2006SI2006/3249 = Avian Influenza (H5N1 in WildBirds) (England) Order 2006 – implementsvarious Commission Decisions of December 2006– 30th December 2006SI2006/3254 = Common Agricultural PolicySingle Payment and Support Schemes (Cross-compliance) (England) (Amendment)Regulations 2006 – amend eponymous 2005regulations (SI2005/3459) regarding priority overcertain agri-environment schemes over cross-compliance obligations – 1st January 2007SI2006/3260 = Welfare of Animals (Transport)(England) Order 2006 – provides foradministration and enforcement of CouncilRegulations 1/2005 & 1255/97, the latter insofaras it concerns staging points – 5th January 2007SI2006/3295 = Town and Country Planning(Environmental Impact Assessment)(Amendment) Regulations 2006 – amendTown and Country Planning (EnvironmentalImpact Assessment)(England and Wales)Regulations 1999 to implement Art.3 Directive2003/35 – England only, save Reg.22 whichapplies to UK – 15th January 2007SI2006/3309(W299) = Avian Influenza (H5N1 inPoultry) (Wales) Order 2006 – Welsh equivalentof SI2006/3247 (q.v.) – 13th December 2006SI2006/3310(W300) = Avian Influenza (H5N1in Wild Birds) (Wales) Order 2006 – Welshequivalent of SI2006/3249 (q.v.)– 13th December 2006SI2006/3342(W303) = Agricultural Subsidies andGrants Schemes (Appeals) (Wales) Regulations2006 – enable National Assembly for Wales toestablish an appeals procedure for farmers inconnection with funding of certain elements ofCAP schemes – 1st January 2007SI2006/3343(W304) = Rural DevelopmentProgrammes (Wales) Regulations 2006 –regulate existing and new programmesadministered by the National Assembly for Wales– 1st January 2007SI2006/3407 = Animal Health and Welfare(Scotland) Act 2006 (Consequential Provisions)

(England and Wales) Order 2006 – makesprovisions consequential upon the said Act– 15th December 2006SI2006/3452(W313) = Animals and AnimalProducts (Import and Export) (Wales)(Amendment) (No.2) Regulations 2006 – amendeponymous 2006 regulations (SI2006/1536(W153))to implement extended EU ban, under CommissionDecision 2005/760, on import of captive birds fromthird countries – 31st December 2006SI2007/3 = Animals and Animal Products(Import and Export) (England) (Amendment)Regulations 2007 – English equivalent ofSI3452/2006(W313) (q.v.) – 5th January 2007SI2007/4 = Cider and Perry and Wine and Made-wine (Amendment) Regulations 2007 – amendCider and Perry Regulations 1989 (SI1989/1355)and the Wine and Made-wine Regulations 1989(SI1989/1356) – 1st February 2007SI2007/56 = Food Hygiene (England)(Amendment) Regulations 2007 – amend FoodHygiene (England) Regulations 2006 (SI2006/14)by updating definitions of Community instruments– 14th February 2007SI2007/75 = Rural Development (Enforcement)(England) Regulations 2007 – implementArt.74(1) Council Regulation 1698/2005 andArt.9(1) Council Regulation 1290/2005 regardingprotection of EU interests in respect of expenditureon rural development – 12th February 2007SI2007/106 = Dairy Produce Quotas(Amendment) Regulations 2007 – amend DairyProduce Quotas Regulations 2005 (SI2005/465) –31st March 2007SI2007/203(W17) = Environmental ImpactAssessment (Uncultivated Land and Semi-natural Areas) (Wales) (Amendment)Regulations 2007 – amend Environmental ImpactAssessment (Uncultivated Land and Semi-naturalAreas) (Wales) Regulations 2002 (SI2002/2127) toimplement Directive 2003/35 – 9th February 2007SI2007/210 = Contaminants in Food (England)Regulations 2007 – revoke and re-enact withchanges Contaminants in Food (England)Regulations 2006 (SI2006/1464) to execute andenforce of Commission Regulation 1881/2006– 1st March 2007SI2007/402 = Welfare of Animals (Slaughter orKilling) (Amendment) (England) Regulations2007 – amend Welfare of Animals (Slaughter orKilling) Regulations 1995 (SI1995/731 as amendedby SI2001/3830) as regards the killing of end of layhens – 6th April 2007

Instruments with a Welsh reference (W...) apply to Wales only unless otherwise statedThe date stated is the date on which the Instrument comes into force

STATUTORY INSTRUMENTS to 28th February 2007

SI2007/405 = Poultry Breeding Flocks andHatcheries (England) Order 2007 – revokes andremakes the Poultry Breeding Flocks andHatcheries Order 1993 (SI1993/1898)– 7th March 2007SI2007/448 = Diseases of Animals (ApprovedDisinfectants) (England) Order 2007 – revokesand remakes the Diseases of Animals (ApprovedDisinfectants) Order 1978 (SI1978/32)– 6th April 2007SI2007/456 = Commons Act 2006(Commencement No.2, Transitional Provisionsand Savings) (England) Order 2007 – brings intoforce S.15 Commons Act 2006 relating toregistration of land as a town or village green –contains a schedule of provisions of the said Act inforce – 6th April 2007SI2007/457 = Commons (Registration of Townor Village Greens) (Interim Arrangements)(England) Regulations 2007 – specify procedurefor applications under S.15 Commons Act 2006 –6th April 2007SI2007/465 = Greenhouse Gas EmissionsTrading Scheme (Amendment) Regulations2007 – amend Greenhouse Gas Emissions TradingScheme Regulations 2005 (SI2005/925 asamended by SIs2005/2903 and 2006/737) whichimplement Directive 2003/87 – 16th March 2007SI2007/477 = Dairy Produce (MiscellaneousProvisions) Regulations 2007 – abolish DairyProduce Quota Tribunals and make consequentialamendments to Dairy Produce Quotas (GeneralProvisions) Regulations 2002 (SI2002/458)– 6th April 2007SI2007/499 = Animal Welfare Act 2006(Commencement No.1)(England) Order 2007 –brings into force certain provisions of said Act on23rd March 2007 and others on 6th April 2007SI2007/529 = Cattle Identification Regulations2007 – revoke and remake provisions of earlierregulations – 6th April 2007SI2007/540 = Commons Registration(Objections and Maps) (Amendment) (England)Regulations 2007 – amend CommonsRegistration (Objections and Maps) Regulations1968 to enable the registration of certain land orrights to be made final or be removed from theregister – 6th April 2007SI2007/560 = Home Information Pack (RedressScheme) Order 2007 – requires estate agents tobe members of an approved redress scheme todeal with complaints related to HIPs– 1st June 2007

19

BRUSSELS UPDATE to 28th February 2007Directive 2006/118 of the European Parliamentand of the Council on the protection ofgroundwater against pollution and deteriorationRegulation 1923/2006 of the EuropeanParliament and of the Council amendingRegulation 999/2001 laying down rules for theprevention, control and eradication of certaintransmissible spongiform encephalopathiesCouncil Regulation 1997/2006 amendingRegulation (EEC) No 2092/91 on organicproduction of agricultural products and indicationsreferring thereto on agricultural products andfoodstuffsCouncil Regulation 2011/2006 adaptingRegulation 1782/2003 establishing common rulesfor direct support schemes under the commonagricultural policy and establishing certain supportschemes for farmers, Regulation 318/2006 on thecommon organisation of the markets in the sugarsector and Regulation 320/2006 establishing atemporary scheme for the restructuring of thesugar industry in the Community, by reason of theaccession of Bulgaria and Romania to the EUCouncil Regulation 2012/2006 amending andcorrecting Regulation 1782/2003 establishingcommon rules for direct support schemes underthe common agricultural policy and establishingcertain support schemes for farmers and amendingRegulation 1698/2005 on support for ruraldevelopment by the European Agricultural Fund forRural Development (EAFRD)Commission Decision 2006/875 approvingprogrammes for the eradication and monitoring ofanimal diseases, of certain TSEs, and for theprevention of zoonoses presented by the MemberStates for the year 2007Commission Decision 2007/18 approvingcontingency plans for the control of foot-and-mouthdisease pursuant to Council Directive 2003/85Commission Decision 2007/19 approvingcontingency plans for the control of classical swinefever pursuant to Council Directive 2001/89Commission Decision 2007/21 amendingDecision 2005/760 as regards certain protectionmeasures in relation to highly pathogenic avianinfluenza and imports of birds other than poultryinto the CommunityCommission Decision 2007/22 amendingDecision 2006/875 approving programmes for theeradication and monitoring of animal diseases, ofcertain TSEs, and for the prevention of zoonosespresented by the Member States for the year 2007Commission Decision 2007/24 approvingcontingency plans for the control of avian influenzaand Newcastle disease

Commission Decision 2007/25 as regards certainprotection measures in relation to highlypathogenic avian influenza and movements of petbirds accompanying their owners into theCommunityCommission Decision 2007/83 amendingDecision 2006/415 concerning certain protectionmeasures in relation to highly pathogenic avianinfluenza of the subtype H5N1 in poultry in the UKCommission Decision 2007/128 amendingDecision 2006/415 concerning certain protectionmeasures in relation to highly pathogenic avianinfluenza of the subtype H5N1 in poultry inHungary and the UKCommission Regulation 1847/2006 adaptingcertain horizontal Regulations in the commonagricultural policy by reason of the accession ofBulgaria and Romania to the European UnionCommission Regulation 1848/2006 concerningirregularities and the recovery of sums wronglypaid in connection with the financing of thecommon agricultural policy and the organisation ofan information system in this field and repealingCouncil Regulation 595/91Commission Regulation 1854/2006 publishing,for 2007, the agricultural product nomenclature forexport refunds introduced by Regulation 3846/87Commission Regulation 1854/2006 publishing,for 2007, the agricultural product nomenclature forexport refunds introduced by Regulation 3846/87Commission Regulation 1913/2006 laying downdetailed rules for the application of theagrimonetary system for the euro in agriculture andamending certain regulationsCommission Regulation 1919/2006 adaptingseveral Regulations concerning the commonorganisation of the milk and milk products marketby reason of the accession of Bulgaria andRomania to the European UnionCouncil Regulation 1944/2006 amendingRegulation 1698/2005 on support for ruraldevelopment by the European Agricultural Fund forRural Development (EAFRD)Commission Regulation 1974/2006 laying downdetailed rules for the application of CouncilRegulation (EC) No 1698/2005 on support for ruraldevelopment by the European Agricultural Fund forRural Development (EAFRD)Commission Regulation 1975/2006 laying downdetailed rules for the implementation of CouncilRegulation 1698/2005, as regards theimplementation of control procedures as well ascross-compliance in respect of rural developmentsupport measures

Commission Regulation 1998/2006 on theapplication of Articles 87 and 88 of the Treaty to deminimis aidCommission Regulation 2002/2006 amendingRegulation 795/2004 laying down detailed rules forthe implementation of the single payment schemeprovided for in Council Regulation 1782/2003establishing common rules for direct supportschemes under the common agricultural policy andestablishing certain support schemes for farmersCommission Regulation 2025/2006 amendingRegulation 796/2004 laying down detailed rulesfor the implementation of cross compliance,modulation and the integrated administration andcontrol system provided for in Council Regulation1782/2003 establishing common rules for directsupport schemes under the common agriculturalpolicy and establishing certain support schemesfor farmersCommission Regulation 116/2007 amendingRegulation 382/2005 laying down detailed rulesfor the application of Council Regulation 1786/2003on the common organisation of the market indried fodderCommission Regulation 163/2007 fixing, for the2005/06 marketing year, the amounts to be paidby sugar manufacturers to beet sellers in respectof the difference between the maximum amountof the base levy and the amount of that levy tobe chargedCommission Regulation 164/2007 fixing theproduction levies in the sugar sector for the2005/06 marketing yearCommunity Guidelines for State Aid in theAgriculture and Forestry Sector 2007 to 2013(2006/C 319/01)Consolidated Versions of the Treaty on EuropeanUnion and of the Treaty Establishing the EuropeanCommunity (C321E/1)The following instruments amend others byreason of the accession of Bulgaria and Romania:Council Directives 2006/104, 2006/105 &2006/108; Council Regulations 1463/2006(corrigendum at OJ L48, 16.2.07), 1791/2006 &2011/2006; Commission Directives 2006/83 &2006/84; and Commission Regulations 1792/2006,1965/2006, 1993-94/2006 (corrigendum at OJ L50,19.2.07), 2016/2006, 2018/2006, 2024 (Romaniaonly), 2029-2031/2006 & 100/2007See also the following Official Journals forinformation regarding cases before the ECJ andthe Court of First Instance: C294 (2.12.06); C310(16.12.06); C326 (30.12.06); C331 (30.12.06); C20(27.1.07); C33 (15.2.07); and C42 (24.2.07)

Following agreement in Brussels on the vexed questionof voluntary modulation (see Page 6), the shape of theRural Development Programmes (RDPs) for England,

Scotland and Wales is slowly becoming apparent, althoughthere remains a long way to go.

The several authorities in the UK reacted differently to thecrisis precipitated when the European Parliament refused lastNovember to agree the proposal for Member States to bepermitted to modulate further funds from the Single FarmPayment to rural development, subject to an overall ceilingof 20%. The stand-off that has been going on since then hasmeant that no firm programmes can be created, still less lodgedwith and approved by Brussels.

The Scots put in place a temporary plan, with a derogationfrom the EC Commission, for payments of £40m to be madeavailable. The Welsh, in contrast, announced a £14m cut in thebudget for Tyr Mynydd.

DEFRA closed the schemes running under the previousRDP – Rural Enterprise, Processing & Marketing, VocationalTraining and Energy Crops – last June. The agri-environmentschemes established under the 2003 CAP reform at Entry Leveland Higher Level remained open to new applications, but withvarying commentary on the likelihood of acceptance andcontracts that were only provisional (and thus pretty useless)pending resolution of the problems.

Now that the political problems have been resolved –and the UK got pretty much what it wanted – more detail isbeginning to emerge.

Wales and Scotland have not yet confirmed the amounts tobe raised by voluntary modulation, but in England it will beginat a rate of 12% this year, rising next year to 13% and in2009-12 to 14%.

The Scottish Executive has produced a Q&A sheet showingthe funds available taking no account of voluntary modulation.The absence of that information in Scotland and Wales meansthat little of any substance can be said about how much willbe available for the various rural development schemesin those regions and, thus, how the schemes will proceedfrom here.

The position is little better in England. DEFRA hasannounced a budget for the seven-year period of £3.9bn ofwhich £3.3bn will be allocated to agri-environment and landmanagement schemes within the scope of Axis 2 of the RuralDevelopment Regulation (1698/2005). The balance will beavailable for schemes to make agriculture and forestry morecompetitive (Axis 1) and to enhance opportunity in rural areas(Axis 3).

Some of the Axis 1 funds will be devoted to a scheme aimedat assisting the livestock industry to tackle its own particularenvironmental challenges.

The funds allocated to Axis 2, which account for 80% of thetotal voluntarily modulated, will be co-financed by the Treasury, sothat for each £60 voluntarily modulated to that end the governmentwill contribute a further £40.

The net result is that the overall budget is almost twice as highas it was for the period 2000-06. However, only £750m of the£3.9bn comes from money directly allocated from the EuropeanAgricultural Fund for Rural Development. The balance is madeup primarily of co-financing (£1.55bn, including some state-aidfunding) and the additional funds taken from the Single FarmPayment (£1.4bn). Early indications are that Pillar 1 payments toEnglish farmers will be around 14% lower than those to other EUfarmers as a result of the additional modulation.

More information will be published on the DEFRA website(www.defra.gov.uk/erdp/) and those of the devolved authorities(www.scotland.gov.uk/Topics/Rural/RDR/intro andnew.wales.gov.uk/topics/environmentcountryside/countryside_policy/rural_development/rdp0713/) GDW

Forthcomingevents...AGM & ANNUAL DINNER 200829th February 2008Royal Overseas League, LondonALA:ThE NExT GENERATION26th April 2007University Law School, Newcastle

ALA:ThE NExT GENERATION4th June 2007Angel Hotel, Market Harborough

ALA/WS SOCIETy 10Th ANNUAL JOINTSEMINAR ON AGRICULTURE15th June 2007Signet Library, Edinburgh

Full details of all meetings and other events are posted onthe Calendar of Events on the website, or Members maycontact Geoff Whittaker on (01206)383521 or emailmeetings@ala.org.uk

Funding agreed but RDPsremain works in progress