Decision of the Scottish Land Court

Highlands and Islands Enterprise (Applicant)
v
Crofters having rights in Melness Common Grazings (Respondents)

Case reference SLC/77/20
before
Lord Minginish, Chairman, and John A Smith
10 September 2021

Note

[1] This is an application under section 19A of the Crofters (Scotland) Act 1993 (“the Act” or “the 1993 Act”). The applicants are Highlands and Islands Enterprise (“HIE”), the North of Scotland development agency established under the Enterprise and New Towns (Scotland) Act 1990. It seeks the Court’s consent to part of the Melness Common Grazings, Sutherland, known as the Moine (an Anglicisation of its Gaelic name A Mhòine, meaning, literally, “The Peat”) being developed for the purpose of building a Space Hub from which rockets will launch satellites into space. The application is made with the consent of Melness Crofters Estate (“MCE”), as community owners [1] of the grazings and is opposed by three of the local crofters, James Paterson Mackay, Donald McBeath Reid and Rory Robert Lowe.

The Scheme for Development

[2] The scheme for which consent is sought (hereinafter referred to as “the Scheme”) covers an area of about 2,464 acres (approx. 997 hectares) of the grazings (“the Space Hub Site”), comprising a “Core Subjects” area of around 759 ac (307 ha) and a “Lease Exclusion Zone” of around 1705 ac (690 ha) of which the built infrastructure, all located within the Core Subjects, occupies a maximum of 13 ac (5.26 ha). The total extent of the grazings is of the order of 12,523 ac (5068 ha).

[3] The legal structure of the Scheme is as follows. There is in force an Option Agreement between the applicants and MCE whereby, on the crystallisation of certain conditions, they will be obliged to enter into a lease on terms already agreed (production 4). Although they reserve the right to do so, it is not the applicants’ intention to operate the Space Hub themselves but to lease it to an operator active in the space industry, the current contender being Orbex, a UK company based in Forres.

[4] The salient terms of the lease are:

[5] The rent is to be divided equally between MCE and the crofters with shares in the common grazings. The crofters’ shares will be paid to the Grazings Clerk and distributed according to their soumings.

[6] The effects of the Scheme on the crofters can be summarised as follows:

[7] As well as the Lease Exclusion Zone the Scheme involves the creation of Launch Exclusion Zones. The purpose of these zones is public safety. Although the term is not one which appears in the legislation, the requirement for such zones stems from the safety provisions of the Space Industry Act 2018 and regulations made thereunder. [2] They will vary from launch to launch, according to inter alia, the size of the rocket, its design and the fuel it is carrying. The idea is to identify the area around the launch site and the rocket’s flightpath (whether over land or sea) which would be at risk from debris should something go wrong. These zones will be demarcated on launch days, or whenever any potentially hazardous activity is being undertaken. Members of the public, but not livestock, will be excluded from these zones. They are to be based on a “safety case” prepared by the launch operator.

[8] The development has planning permission in perpetuity but consent is limited to a maximum of 12 rocket launches a year. However, it should be noted that the lease does not contain the same cap on annual launches: it permits a maximum of 90 in the first five years and up to 40 per annum thereafter.

Legislation

19A Schemes for development

(1) The landlord (or owner), or any person acting with the consent of the landlord (or owner)—

(a) may by application to the Land Court seek its consent to—

(i) croft land or common grazing; or

(ii) land near to croft land or common grazing if rights and liabilities in relation to the croft land or common grazing would be affected,

being developed in accordance with a scheme appended to the application; or

(b) may intimate to that Court that every person who has rights in or over croft land or a common grazing consents to its being developed in accordance with a scheme appended to the intimation,

and the applicant shall send a copy of the application or as the case may be of the intimation (and, in either case, of the appended scheme) to the Commission.

(2) Consent under paragraph (a) of subsection (1) above is not to be given unless the Court is satisfied—

(a) that the development is for a reasonable purpose;

(b) that to carry it out would not be unfair;

(c) that the scheme provides for there to be fair recompense to each member of the crofting community in the area affected by the development for the effects of the development (including, in relation to the croft land of each such member, recompense at least equivalent to the recompense which the member might be expected to have obtained had that croft land been resumed); and

(d) that, were the development carried out—

(i) that community would be likely to benefit financially; and

(ii) such benefit would be at least commensurate with any financial benefit which the members of that community might obtain on the development proceeding other than by virtue of this section.

(3) For the purposes of subsection (2) above—

(a) the definition of “reasonable purpose” in subsection (3) of section 20 of this Act applies as it does for the purposes of subsection (1) of that section;

(b) it is unfair to carry out a development only where to do so would have significant adverse consequences for one or more of the members of the crofting community in the area affected by the development and either those consequences would be disproportionately greater than the adverse consequences for the other members of that community or there would be no adverse consequences for those other members;

(c) whether recompense is fair is to be determined having regard both to the value of the development and to its effect on the member in question; and

(d) an effect for which there is to be fair recompense may be an effect of any kind whatsoever (and in particular need not be an effect on a croft qua croft).

(4) An application under paragraph (a) of subsection (1) above or intimation under paragraph (b) of that subsection shall—

(a) be made in such form; and

(b) be accompanied by such fee,

as the Court shall specify; and the Court may make different provision for different categories of case.

(5) Provision made under subsection (4)(a) above shall include provision as to the form and content of the appended scheme.

(6) A person making an application under paragraph (a) of subsection (1) above or giving intimation under paragraph (b) of that subsection shall forthwith give public notification of the application or intimation.

(7) Within 28 days after the public notification is given (including the day on which given)—

(a) the Commission; or

(b) any other interested party,

may submit to the Court written objections, on one or more of the grounds mentioned in subsection (8) below, as respects the application or intimation; and the Court shall hear the objectors (if any) before determining whether to give consent under this section or as the case may be before determining whether to proceed under subsection (10) below as respects the intimation.

(8) The grounds are—

(a) that the development is not for a reasonable purpose (the definition of “reasonable purpose” in subsection (3) of section 20 of this Act applying for the purposes of this paragraph as it applies for the purposes of subsection (1) of that section);

(b) that to carry out the development would be unfair to the crofting community;

(c) in the case of a submission under paragraph (a) of subsection (7) above, that the scheme does not provide for there to be fair recompense to each member of the crofting community;

(d) in the case of a submission under paragraph (b) of subsection (7) above—

(i) that to carry out the development would be unfair to the objector;

(ii) that the scheme does not provide for there to be fair recompense to the objector;

(e) that, were the development to be carried out, the crofting community would be unlikely to benefit financially;

(f) that, were the development to be carried out, any financial benefit to the crofting community would not be as mentioned in sub-paragraph (ii) of subsection (2)(d) above.

(9) The Court shall, whether or not there is a hearing under subsection (7) above, give reasons for any such determination.

(10) On—

(a) giving consent under this section; or

(b) determining to proceed under this subsection as respects an intimation,

the Court shall advise the Commission that it has done so and provide them with a copy of the scheme in accordance with which the development is to take place; and the Commission shall enter that copy in the Register of Crofts.

(11) When so entered the scheme shall, in so far as its terms so provide, be binding on—

(a) the landlord (or owner);

(b) any member of the crofting community in the area affected by the development;

(c) any person who, though not described in paragraph (b) above, is—

(i)a tenant of a croft; or

(ii) a holder of grazing rights,

in that area; and

(d) the successors to the persons mentioned in paragraphs (a) to (c) above.

Section 20(3)

(3) For the purposes of subsection (1) above “reasonable purpose” shall include—

(a) the using, letting or disposing of the land proposed to be resumed for—

(i) the building of dwellings;

(ii) small allotments;

(iii) harbours, piers, boat shelters or other like buildings;

(iv) churches or other places of religious worship;

(v) schools;

(vi) halls or community centres;

(vii) planting;

(viii) roads practicable for vehicular traffic from the croft or township to the public road or to the seashore;

(viiia) the generation of energy; or

(ix) any other purpose likely to provide employment for crofters and others in the locality;

(b) the protection of an ancient monument or other object of historical or archaeological interest from injury or destruction.

Cases referred to

Aberdeen City and Shire SDPA v Elsick Development Co Ltd [2017] UKSC 66
Andrea v Macdonald 1961 SLCR 15
Druim Leathann Windfarm Limited v Shareholders in North Tolsta and Glen Tolsta and New Tolsta Grazings SLC/28/18, decision of 24 May 2019
10th Duke of Argyll’s Trustees v Crofters sharing in Sandaig Common Grazing 1983 SLCR 89
Duke of Sutherland v Mackay 1917 SLCR 13
Glen Spean Estate v MacLachlan 2016 SLCR 74
Stornoway Windfarm Limited v Crofters having rights in Stornoway Windfarm Site SLC/59/17, decision of 1 March 2019

The hearing of the application

[9] The application was lodged on 6 August 2020 and, after sundry procedure, it came to proof, conducted on Webex, on 18 May and subsequent dates 2021 when the applicants were represented by Mr James Findlay QC, instructed by Brodies LLP, and the respondents by Ms Ailsa Wilson QC and Ms Laura-Anne van der Westhuizen, advocate, instructed by Gillespie Macandrew LLP.

[10] We heard evidence from,for the applicants, Mrs Dorothy Louise Pritchard, Chairperson of the Board of Directors of MCE, Mr Allan George Mackay, Clerk to the Melness Grazings Committee, Mr Royce Kirk, HIE’s Project Director for Space Hub Sutherland, Mr David Howie, HIE’s Programme Head for Space Hub Sutherland, Mr David Joseph Oxley, HIE’s Director of Growth, Mr Mark Kummerer, founder and proprietor of MKA Economics Ltd, and Mr Clive Meikle BSc (Hons) Dip Surv MRICS, a partner in Bidwells LLP, Property Consultants, and, for the respondents, in addition to themselves, Ms Lea Anker, a former resident of Melness and former member of the MCE Board, Mr Scott Michael Hammond, Deputy Chief Executive and Operations Director of Shetland Space Centre Ltd, Mr Graeme Blackett BA (Hons) MIED MEDAS, Director of BiGGAR Economics Ltd, Mr Fraser Blackwood BA (Hons) MSc, Associate Director at Jones Lang LaSalle (JLL), Chartered Surveyors and Land Agents, Mr Julian John Sandbach, Director of JLL and Mr Calum Innes BLE FRICS, partner in CKD Galbraith LLP, Chartered Surveyors and Land Agents.

[11] In the interests of relative brevity we do not propose to set out the evidence. A lot of the respondents’ evidence was in any event irrelevant because it had to do with issues such as how MCE is run, dissatisfactions which are said to be rife in the community in that regard, the safety of the Space Hub, its effects on wildlife, other environmental concerns and its effect on local traffic. These are not matters for us, as we sought to make clear by an email from the Principal Clerk to parties’ agents in advance of the proof. Instead our remit is to address the four conditions laid down in section 19A(2) as to which we must be satisfied before we grant consent to the Scheme. The evidence which was relevant and what we made of it will, we trust, become apparent in the following discussion of these four conditions. We deal with each in turn, setting out the parties’ submissions and our decision on each as we go along. In coming to a decision on these issues we have sometimes had to prefer the evidence of one witness to another and we hope that we have made the reasons for our preferences clear in what follows. Our task was, however, greatly assisted by all the expert witnesses we heard and we are grateful to them.

19A(2)(a) – whether the development is for a reasonable purpose

Applicants’ submissions

[12] The starting point for the applicants’ was that the list of reasonable purposes contained in section 20(3) of the Act is not exhaustive, merely illustrative. Examples were given of the Court having entertained the building of the South Uist rocket range (Andrea v Macdonald), a golf course at Brora (Duke of Sutherland v Mackay) and a Ministry of Defence hydrographic station in Argyll (10th Duke of Argyll’s Trustees v Crofters sharing in Sandaig Common Grazing) as reasonable purposes for resumption.

[13] Reference was made to the importance of this development for the purposes of UK space policy. It is the only project to have been awarded a grant (£2.5m) from the UK Space Agency. The Scottish Government’s policy aim of creating a £4 billion space sector market by 2030 was also referenced. This development would make a significant contribution to that aim. Mention was also made of its socio-economic benefits locally and nationally (within Scotland).

[14] The majority of Melness crofters thought the building of a space port was a reasonable purpose as, evidently, did the majority of crofters having shares in the common grazing on Unst, Shetland, on which that development – held up as a comparable by the respondents – was to proceed. If building a rocket launch facility was a reasonable purpose in Unst it was also a reasonable purpose in Melness. Similarly effects which were said (by Mr Blackett) to be transformational in Unst could also be transformational in Melness/Tongue.

[15] There could be no sensible dispute as to whether this was a reasonable purpose and the respondents were merely “arguing round the edges”.

Respondents’ submissions

[16] Ms Wilson’s first point was to draw attention to para 2.1 of the Scheme, which says that the purpose of the Scheme is “to provide legally enforceable rights of access to and for the use of such parts of the Space Hub Site required (sic) to enable the Developer or the Applicant to construct and thereafter for the operation [of the Space Hub]”. That could not be a reasonable purpose because the Land Court had no power to grant legally enforceable rights of access over land and certainly not to non-crofters. If that was a drafting mistake it was too late now to amend it, there being no provision in the Act for the amendment of a section 19A scheme.

[17] The purpose being pursued here was not one of those listed in section 20(3). The cases relied on by the applicants were distinguished, the first two on the ground that they proceeded under earlier iterations of the resumption provision now found in section 20 of the 1993 Act. It is not clear to us what point was being made in relation to the Duke of Argyll case.

[18] The only use that could possibly apply, of those listed in section 20(3), was (ix) – “any other purpose likely to provide employment for crofters and others in the locality”. Ms Wilson emphasised the need to show likelihood of employment. That had not been established on the evidence here. The economic impact assessment produced by Mr Kummerer had been prepared in connection with the planning application but the grant of planning permission was irrelevant to the question of reasonable purpose. The dataset used for that assessment was not designed to allow assessment of the socio-economic impacts of the Scheme on such a small geographical area as was referred to in section 20(3)(ix).

[19] No audit had been carried out to identify what skills were available in the locality. In the absence of that information Mr Blackett’s conclusion that skilled jobs were likely to be taken by people commuting into the area was to be preferred. The information presented to Mr Blackett in relation to the Unst Space Centre had been much more detailed. In summary, the employment benefits referred to by the applicants’ were no more than a possibility, not a likelihood.

Decision

[20] We begin with the argument that the Scheme could not be for a reasonable purpose because its declared purpose (at para 2.1) is to obtain “legally enforceable rights of access” to the Space Hub Site, something beyond the Court’s jurisdiction. Although that appears under the heading “The Purpose”, it is perfectly plain that this application is not about rights of access. A much more accurate statement of the Scheme’s purpose is contained in its very first paragraph which says “The Applicant seeks the Court’s consent for the construction, maintenance, renewal, repair, operation, and decommissioning of the Space Hub together with the works required for the Habitat Management Works and Peat Management Works”.

[21] Just as that approach by senior counsel for the respondents was too narrow, so too was her interpretation of the statutory provisions on reasonable purpose. The list of purposes contained in subsection (3) of section 20 is not exhaustive and has to be read in the context of the resumption power contained in subsection (1), which says that the Court has to be satisfied that the land is being resumed for some reasonable purpose “having relation to the good of the croft or of the estate or to the public interest or the interests of the crofting community in the locality of the croft”. One sees from this that the scope of the resumption power is wider than the good of the immediate locality, although all the examples given in subsection (3) are, with the exception of “the generation of energy”, very locally focussed. The widening of the relevant interests to include “the public interest” goes back to section 12 of the Crofters (Scotland) Act 1955 and ever since then the Court has been entitled to authorise the resumption of land in the public interest. We see no basis for interpreting “reasonable purpose” as narrowly as it was submitted we should.

[22] It seems clear to us, given the importance which both UK and Scottish governments attach to the development of space ports and the almost (but not quite) unique suitability of this site for that purpose, that this can be described as a reasonable purpose to which to put the land in the public interest.

[23] We go on, however, to consider whether it also qualifies as a reasonable purpose by virtue of likelihood to provide employment for crofters and others in the locality (subsection (3)(ix)).

[24] The relevant witnesses are Mr Kummerer and Mr Blackett, who have been carrying out similar functions in relation to the Sutherland Space Hub and the Shetland Space Centre, respectively. Mr Kummerer predicts (at para 5.13 of his Supplementary Report, production 74) that 44 jobs will be created “all of which the crofters and others in the local area will have the opportunity to apply for”. As to what kind of jobs he says this:

“5.9 Once operational there are a range of permanent jobs that are likely to be required at the SHS [3] itself. The exact nature and level of onsite employment is unknown but there will be a range of operational, management, administrative, regulatory and maintenance jobs on the site itself.

5.10 … Depending on the skills and willingness of people in the Tongue/Melness and wider Caithness and Highlands, it is difficult to predict the exact level of employment and the beneficiaries at this stage. However, through community consultation events hosted by SHS it is known that the posts are likely to include mechanical and electrical engineers, safety experts, range experts, regulation compliance, marketing, sales administration, weather experts, facility management, site management, logistics management, housekeeping, rangers, control room staff and tourism posts related to visitor management.”

[25] Mr Blackett does not dispute that the development will create, locally, the number of jobs which Mr Kummerer predicts. Where they differ is that Mr Blackett doubts “the capacity of the local economy [in Melness/Tongue] to absorb impacts of this scale” (para 3.6 of his witness statement, production 41), a theme on which he later expands as follows:

“4.6 The applicant has provided no evidence that the required skills would be available in the local community. It would seem unlikely that local residents will have experience in the space industry or skills in aerospace engineering.

6.2 The Frontline report prepared for HIE is clear that the space sector workforce is exceptionally skilled. There is no evidence that these skills are available in the local community and so these employment opportunities would not be available to local residents. Instead, if the proposed development went ahead, these jobs would be taken by people commuting in to or moving to the area.”

[26] We have three observations to make on Mr Blackett’s approach. First, although It is true that no audit has been carried by Mr Kummerer or anyone else as to what skills are available in the local economy, it seems reasonable to suppose that the 200 present unemployed benefits claimants referred to by Mr Kummerer at para 5.18 of his report probably include people capable of taking on some of the roles listed above as well as people with the ability to acquire the new skills required for taking on others.

[27] Secondly, it seems to us that Mr Blackett’s approach is in any event flawed because, even if his doubts are well-founded, it presumes a static local economy whereas the whole point of economic development is that it creates new opportunities of which people in the locality, including, in this case, members of the crofting community, can take advantage and which will attract new people in, something which is obviously desirable in an area of declining population. One has to consider not just how many members of the crofting community in the locality at this point in time are equipped to take on these jobs but the Scheme’s potential to create opportunities for future generations.

[28] Thirdly, his pessimism as to the local effects of the Sutherland Space Hub is in marked contrast with his optimism in relation to Unst, where he describes the effects of the Space Centre there as likely to be “transformational” (production 42, para 14.10), “of major beneficial significance locally” (para 14.10.4), likely to produce 139 jobs on Unst (para 14.10.11) and as “[o]ffering a wider range of employment opportunities and new career paths available to young people in Unst and in the Shetland Islands” (para 14.10.13). This is something on which he was cross-examined by Mr Findlay. As we understand his responses, they were to the effect that those who had written the Socio Economic report for the Shetland project (production 42) had been provided with more detailed information than informed Mr Kummerer’s report. For our part we find it difficult to identify anything in his written or oral evidence which offers a sound basis for concluding that what is true for Unst (on his evidence) is not also true for Melness/Tongue. In particular we find no mention of a skills audit having been carried out in Unst so we find it hard to understand why he makes so much of the absence of that sort of exercise in Mr Kummerer’s evidence.

[29] We are therefore satisfied that the building of the Space Hub is a reasonable purpose in and of itself, that it is in the public interest for it to go ahead and that it will produce meaningful and desirable employment opportunities in the local area. It is, therefore, a reasonable purpose within the meaning of that term in sections 19A and 20(3) of the Act.

Section 19A(2)(b) – whether the carrying out of the development would be unfair

Applicants’ submissions

[30] Mr Findlay’s omnibus point was that there was simply no evidence of significant adverse consequences for some members of the community that were disproportionately greater than for others, which is the only kind of unfairness struck at by section 19A(2)(b) (read along with subsection (3)(b)). The only person differently affected by the Scheme was the one crofter whose sheep were hefted to the area of the Space Hub Site and would therefore have to be removed on launch days. Provision was made in the Scheme as to who was to remove the sheep and for their remuneration. Mr Lowe’s complaint that he would not be able to get an apportionment was nullified by the fact that where he wanted the apportionment was nowhere near the launch site and, therefore, not within the area in which apportionments would be prohibited.

Respondents’ submissions

[31] Ms Wilson submitted that carrying out the development would be unfair in seven ways: (i) its effect on stock management, (ii) effects associated with the Habitat Management Plan, (iii) the prohibition of apportionments, (iv) the cost of removing stock on launch days, (v) that the Scheme contains no restriction as to the number of launch days per annum, (vi) effects associated with the Visitor Management Plan (“VMP”) and (vii) lack of information on adverse effects relating to Launch Exclusion Zones.

[32] As to (i) the unfairness was that graziers would not be able to exercise their full souming rights in future because of stocking densities being, in effect, capped at present levels by the Scheme. Future intending graziers – crofters wishing to exercise their souming rights – would be excluded because the grazings were already being used to the maximum permitted stocking density limit.

[33] As to (ii), the unfairness was the lack of information about the extent to which the grazing area might be affected by the habitat restoration works. We were invited to take an adverse inference from what was said to be the applicants’ reluctance to call Ms Lindeman as a witness. Ms Lindeman had confirmed that the Habitat Management Plan (“HMP”) would have to conform to the principles of the Outline Habitat Planand that it was based on the current level of 500 to 600 sheep grazing on the common grazings. The HMP would last for the duration of the development. The applicants had sought to divert attention from the significance of stocking density by focussing instead on the fact that fencing would not be required to protect restoration areas. In regard to these matters generally we should prefer the evidence of Mr Blackwood. His evidence had been that it was not possible to be sure as to the area that would be affected by the proposed peat bog restorations works under the HMP. The evidence had disclosed that the area covered by habitat restoration works had increased from 67.5 to 86 ha. That was required in order to satisfy condition 24 of the planning permission. The evidence was not sufficient to satisfy the Court as to the extent of the common grazings which was intended for use for peat bog restoration.

[34] As to (iii), the prohibition of apportionments, Allan Mackay had said that apportionments were likely to be prohibited not just on the Space Hub Site but also elsewhere within the ring fence round the hill because of proximity to Sites of Special Scientific Interest. Mr Lowe, who was currently contemplating applying for an apportionment, was unlikely to get one on the hill due to this prohibition.

[35] As to (iv), the cost of removing stock on launch days, it was unfair that the £200 per day (= £2,400 per annum on the basis of 12 launches) paid to the person removing the stock was to come from the crofters’ share of compensation and was not additional. Given that the lease did not restrict the number of launches to 12 per annum and that there might be additional requirements to remove stock should other crofters’ stock use the Space Hub Site, the deduction from the crofters’ compensation could be significantly higher than £2,400 per annum. It was unfair on crofters who did not require stock to be removed from the Space Hub Site to have their compensation reduced in this way.

[36] As to (v), the fact there is no limit of launch days per annum in the Scheme (as opposed to the planning permission), Mr Lowe had expressed the view that the site would not be viable at only 12 launches per annum. He had thought this number was just to get a foot in the door and it would have to be increased for the project to become viable.

[37] As to (vi), effects associated with the VMP, condition 11 of the planning consent required a VMP to be submitted but that had not yet happened and no detail had been given as to how visitors would be managed during launches nor where visitor facilities might be. Mr Lowe and Mr Blackwood had both expressed disquiet about this uncertainty. The applicants had said that the VMP related to an area outwith the Scheme of Development area and that there would be no adverse effects on the common grazings but no detail had been provided and it was impossible to be assured that there would be no further land take nor any further restriction of use of the common grazings as a result of the VMP. The possibility therefore remained that it might contain significantly adverse consequences for some members of the crofting community.

[38] As to (vii), lack of information on adverse effects relating to Launch Exclusion Zones, no information had been supplied as to where these would be nor as to their effects. Indeed Mr Kirk and Mr Howie had both confirmed that until the licensing process was complete, this information was unknowable. In particular, there was concern that a temporary restriction order may be applied for under section 40 of the Space Industry Act and there was no indication that thought had been given to additional compensation in that event. There were, therefore, potential effects on crofters which were unquantified.

Decision

[39] The definition of unfairness in section 19A is a narrow one. The question is whether the Scheme for Development “would have significant adverse consequences for one or more of the members of the crofting community in the area affected by the development and either those consequences would be disproportionately greater than the adverse consequences for the other members of that community or there would be no adverse consequences for those other members” (subsection (3)(b)).

[40] It does not seem to us that any of the matters complained of under this head come into that category. Mostly that is because the matters complained of affect all shareholders in the grazings equally so that the test for unfairness contained in subsection (3)(b) is not satisfied.

[41] So far as stock management is concerned the objection proceeds on a misconception. It is not the case that shareholders who might wish to use their soumings in future would be excluded from use of the grazings. The Scheme does not, of itself, interfere with souming rights in any way. If the effect of the HMP is to cap stocking density at its present level, or any other level short of the aggregate of all existing souming rights, that does not mean that those whose animals are on the grazings at the moment, or at the time the cap is reached, could keep them there to the exclusion of all others. What would have to happen in that situation is that an agreement for a pro rata reduction of soumings to a level which brought the total within that limit would have to be reached.

[42] Although that is probably enough to dispose of this objection, we should say more about the effect of the Scheme on stocking density.

[43] The present estimated stocking density on the common grazings is 0.11 sheep per hectare. Given that the grazings extend to 5068 ha, that would amount to 557 sheep, which falls within the range of 500-600 sheep estimated in Ms Lindeman’s report, production 5 at para 5.2. (Ms Lindeman’s report at para 5.2 refers to “the land owned by Melness Crofters Estate”, which would, of course, include the inbye croft land but we assume she means the common grazings.)

[44] However the fact that red deer also graze the land has to be taken into account. A deer count carried out as part of the North West Sutherland Deer Management Plan in 2019 put their number at 345. Without going into the arithmetic of the matter, the combined figures for sheep and deer produce a Livestock Unit figure of 0.037 LU/ha. Ms Lindeman (from whose report all of this is taken) describes that as “[t]he total combined grazing pressure across the site”. This is at the lower end of the recommended Scottish Government range for blanket bog and wet heath of 0.037 to 0.075 LU/ha. We estimate the ceiling for sheep numbers (assuming deer numbers remain unchanged) within that range to be 1700, in other words around three times the present number of sheep, although, for that to be permitted, the consent of the HMP Committee would have to be obtained.

[45] The possibility that the quality and extent of grazing available might actually reduce as peat and habitat restoration went along was also considered and quite a lot of time was spent on it in cross-examination of Ms Lindeman. However, she firmly resisted the notion that more areas of land than presently planned were likely to end up being fenced off and in answer to Mr Smith she said that she did not think this work would “drastically change the amount of grazing”. On these matters we prefer her evidence to that of Mr Blackwood because (a) she is an environmental scientist rather than a planner, (b) hydrology and habitat management is a large part of what she does (see her c.v., production 71) and (c) she has had much closer and longer engagement with this site than Mr Blackwood. It is also convenient to say at this point that we reject Ms Wilson’s invitation to take an adverse inference from what she said was the applicants’ reluctance to call Ms Lindeman as a witness: we detect no such reluctance but even if her suspicion is well-founded it does not affect the quality of the evidence we heard.

[46] The position in relation to stock density now and in the future can, therefore, be summarised as follows. First, the development of the Scheme is not likely to lead to a requirement for reduction in stocking density. Second, current stocking density has remained constant for the last 15 years or so (the evidence of Allan Mackay). Third, there is no evidence to suggest that stocking density is going to increase in the foreseeable future. Fourth, should the need arise, there is the possibility of an increase in stocking density being permitted up to a maximum of about three times the present number of sheep, although there is no guarantee that an increase of any kind will be approved. However, fifth, even if such an increase in stocking was allowed it would not be enough to satisfy the total soumings of the Melness crofters. However, sixth, in that situation, the result would not be that those presently having sheep on the hill could maintain their numbers to the exclusion of other shareholders; instead soumings would have to be reduced across the board.On the basis of that factual matrix and given that it is within the judicial knowledge of this court that the consistent and almost universal situation across the Highlands and Islands is that common grazings are vastly underused for grazing, with no sign that that is going to change in the foreseeable future [4], we cannot hold that the effect of the Scheme on grazing is going to be such as to make it unfair either to the generality of Melness crofters or to some individuals more so than others, which is what the statutory test of unfairness requires.

[47] So far as the prohibition of apportionments is concerned, that too, clearly, affects all shareholders equally. There is in any event no right to an apportionment; in terms of section 52(4) of the 1993 Act the granting of an apportionment is at the discretion of the Crofting Commission. Moreover the place where Mr Lowe hopes to get his apportionment is well outwith the Space Hub Site and the Scheme does not prevent the granting of apportionments elsewhere on the common grazings. If apportionments are refused elsewhere that is likely to be because of the proximity of Sites of Special Scientific Interest (Mr Allan Mackay’s evidence), not as a requirement of the Scheme.

[48] The removal of stock on launch days is something which obviously affects graziers with stock on the Site and not others. At present only one shareholder has stock hefted to that area of the hill and she makes no complaint. The fact that the money paid to the persons removing the stock comes out of the crofters’ share of recompense might be described as unfair in general terms – and compares unfavourably to the position with the Shetland Space Centre, where additional compensation is paid – but it impacts equally on all shareholders. It is said that it is unfair that those who do not require stock to be removed from the Site are required to share in the cost of removal. Those who currently have stock on the grazings but are not expected to have to remove them on launch days make no complaint about this arrangement, so they evidently do not think it unfair. So far as those with no stock on the common grazings are concerned, that is entirely a matter of their own choice and we see no unfairness in expecting them to bear a slight diminution of compensation receivable for the effects of the Scheme on rights they choose not to exercise. In any event, to describe this arrangement as having “significant adverse consequences” is fanciful, so the first part of the unfairness test is failed. What would be unfair, in our view, is that those with stock hefted to the Space Hub Site had to remove the stock at their own expense. That is not the position under the Scheme, where the cost is, in effect, shared equally by all shareholders.

[49] So far as there being no restriction in the Scheme on the number of launch days per annum is concerned, that is said to give rise to “uncertainty as to the potential significance of adverse effects associated with launch days during the 75 year period of the lease” (Closing Submissions for the Respondents para 86). It is not explained, however, how an increase in the number of launches bears unfairly on particular members of the crofting community. It may increase the risks to pregnant mares of which Mr Reid spoke but we would have required expert evidence to allow us to assess the full implications of that.

[50] The objection of uncertainty also applies to the VMP and the Launch Exclusion Zones. In relation to the VMP an assurance was given by Mr Howie that any visitor facilities (except a small facility for invited guests) would not be on the common grazings. That is not stated in the Scheme itself but what is stated is that the planning consent requires a Launch Event Visitor Management Group to be established by the developer in association with Highland Council, the Scottish Environmental Protection Agency, Scottish Natural Heritage, Sutherland Access Panel, the Emergency Services and the local Community Councils and that the remit of that Group will be to “develop and review the visitor management proposals in the local area to assist with the provision of mitigation measures in order to minimise the potential for conflict of events and traffic management problems”. Mr Howie’s evidence plus the existence of that group with that remit goes a long way towards reassuring us that concerns about the VMP are not well-founded.

[51] So far as Launch Exclusion Zones are concerned, the extent and whereabouts of these is unknowable until an operator is in place and it prepares a safety case in respect of its intended operations. As has been noted at para 7 above, livestock will not require to be removed from these zones, so they must be at risk of injury or loss of life. Mr Kirk explained that risk diminishes as a rocket gains height. We take from that that it must diminish to what the applicants think is an acceptable level (in terms of harm to livestock) by the time the rocket leaves the Lease Exclusion Zone. But clearly some level of risk remains. However, we note the provisions of section 35(2) of the Space Industry Act to the effect that damages for such loss will be recoverable without proof of negligence and “as if the injury or damage had been caused by the wilful act, neglect, or default of the operator”. The effect of that is that crofters will be indemnified for any loss.

[52] For all of these reasons we are satisfied that the Scheme, if carried out, would not be unfair to members of the crofting community in the area affected.

Section 19A(2)(c) – whether the Scheme offers fair recompense

Applicants’ submission

[53] Mr Findlay drew attention to the fact that there was “only a very narrow bridge between one of the three respondents’ evidence and this aspect”. One of them, Mr Mackay, complained that the members of MCE were getting too much rather than too little, Mr Reid made no mention of it at all and Mr Lowe had raised a concern about recompense but had not evinced any concluded view on the issue. However, Mr Findlay accepted that the Court would have to be satisfied on this aspect in any event, whether or not much was being made of it by the respondents.

[54] The starting point had to be that the lease had been negotiated at arms-length between the parties, both professionally advised. There had been no criticism of that advice from the respondents. Further, there was equality of arms in that £50,000 had been spent by MCE on that advice, £30,000 of it donated by HIE.

[55] The money so spent had achieved for MCE (a) a significant increase in rent, (b) a form of rent review clause, (c) a launch fee payment and review mechanism, and (d) a restriction in the extent of the common grazings to be fenced off.

[56] It was also relevant that the negotiations were conducted in a unique situation with nothing in the way of precedent. HIE had been under a duty not to pay a community it was trying to assist “under the odds” but, equally, had a duty to guard taxpayers’ money. If a comparison was to be made with Shetland, there was just as much chance that the rent being paid there was too high as there was that the Melness rent was too low. In any event the Shetland development was very different, with three launch pads rather than one and a capacity to launch bigger rockets. A higher rent could therefore be justified.

[57] In relation to the specific criticisms made of the lease, the submission that the break provision was unduly generous to the tenant was not understood. Firstly, MCE were guaranteed five years’ rent plus a nine months’ notice period, producing a substantial benefit for no detriment, even if the development did not go ahead. Secondly, if the development did go ahead it would involve HIE investing very significant sums of money, from which they were very unlikely to walk away. Thirdly, both Mr Sandbach and Mr Innes had accepted that any reasonable tenant would be expected to act cautiously and conservatively and it would not be cautious or conservative to tie oneself to a five or 10 year break clause in a novel market. Fourthly, there was no obvious advantage to the landlords in delaying the return of the land to its exclusive use as a common grazing should the development fail. Fifthly, as both Mr Sandbach and Mr Innes had accepted, annual breaks were commonplace in wind farm leases, which was a reasonably mature market, so why should they be thought abnormal for this project?

[58] As to Mr Innes’s suggestion that a £1.5m penalty in the event of failure should have been negotiated, that was completely unrealistic. Why would an economic development agency go into something like this with a £1.5m penalty hanging over its head should it fail?

[59] Criticism had also been made of the rent review clause. As Mr Meikle had explained, there were good reasons why it was as restrictive as it was. As to the criticism that there was no mechanism for rebasing the rent, the same had turned out to be true for Shetland, contrary to the clear implication of Mr Innes’s written evidence. RPI compounded was a sufficient review mechanism and, taken together with the 2% gross launch fee payments, it made sure the landlord would not lose out over the long term.

[60] As to the criticism of the duration of the lease, there was no evidence to suggest that 75 years was abnormal.

[61] Where there was conflict between Mr Meikle and Mr Sandbach as to the terms of the lease, the measured, thoughtful approach of the former should be preferred to the overstatement of which the latter was guilty (in terms of comparison with wind farms and imputing to HIE an intention to walk away from the project).

[62] As to the amount of the rent, Mr Innes had cited only two comparables and there were problems with both. The St Kilda lease was not comparable because it was not a ground lease but a lease of buildings. It was also driven by defence requirements, not the kind of consideration driving spaceports.

[63] As to comparison of the rent with that payable in Shetland, there were significant gaps in the information available about Shetland which made comparison difficult. We did not know what the whole package was in Shetland because we had not seen the second lease. In any event the two projects were different, with different commercial interests involved and different styles of leases. Mr Innes’s comparison was simplistic.

[64] There had also been a suggestion that more areas of land might be fenced off on the Melness Common Grazing due to habitat reinstatement but Ms Lindeman’s evidence had put paid to that.

[65] Something likewise had been made of the effect of the development on permitted stocking density but the only upper limit contained in the HMP had been ignored. There was, in any event, no evidence to suggest that there was any realistic prospect of increasing present stocking levels, which had been at around the same level for 15-20 years.

[66] With reference to the statutory test that recompense had to be fair having regard to the value of the development and its effect, the effect was likely to be minimal. The value was very difficult to assess, with the level of rental being the only possible way of considering it. As the Court had held in Druim Leathann Windfarm Limited v Shareholders in North Tolsta and in Glen Tolsta and in New Tolsta Grazings (at para [32]), what was required was some form of broad correlation so that the recompense was not seen to be unfair given the scale of the development.

[67] The attacks made on the lease, including the level of rent, had not undermined Mr Meikle’s thoughtful analysis and were at odds with the wish of the majority of crofters with shares in the common grazing.

Respondents’ submissions

[68] Ms Wilson reminded us of the terms of the test in section 19A(2)(c). We were required to be satisfied of the fairness of recompense having regard to two elements, the value of the development and the effects it may have on the crofters.The respondents’ position was that the Scheme did not adequately address either.

[69] Concern that the recompense on offer was not fair was not confined to Mr Lowe. The need for recompense to be fair had been discussed at a meeting with Mr White, her instructing solicitor, on 7 September 2020 at which both Hamish Mackay and Donald Reid had been present. There had been a general consensus that the payment on offer did not reflect the disruption the Scheme would cause. Mr Mackay thought he stood to get very little in the way of recompense, as the holder of only one croft, and Mr Lowe had given evidence that the amount he would receive was inadequate. Mr Reid had also described what he stood to get (which he understood to be around £400) as “not much”.

[70] Mention was then made of the criticisms of the MCE Board made by Hamish Mackay, involving the way the company was run and how they might handle the money received. The lack of business experience on the part of the directors was also clear from Mrs Pritchard’s evidence.

[71] As to the relationship between the value of the development and fair recompense, senior counsel cited what we had said in Stornoway Windfarm Limited v Crofters having rights in the Stornoway Windfarm Site (SLC/59/17) [at para 60] to the effect that “the higher the value of the development, the higher one would expect the financial benefits to those whose rights are being interfered with by the development to be”.

[72] Ms Wilson then dealt with Mr Sandbach’s criticisms of the lease, being (a) the lack of a clear definition of the lease subjects, (b) the annual break provision, (c) the highly prescriptive wording of the rent review clause, restricting the definition of what was to be considered comparable to such an extent as made the provision nugatory, (d) the duration of the lease, and (e) the lack of any guarantee in respect of decommissioning the site.

[73] Mr Meikle’s only answer to these criticisms was to rely on the fact that both parties had been professionally advised throughout the negotiations. He had not offered any objective, independent analysis of the lease terms to see whether or not they were fair.

[74] Notwithstanding that professional advice had been accessed, Mrs Pritchard’s evidence showed that she had misunderstood the scope of the Base Rent review clause, believing it to be co-extensive with the Launch Rent Proportion review clause.

[75] The evidence of Mr Sandbach and Mr Innes was that the highly prescriptive nature of the Base Rent Review provisions meant that it was extremely unlikely that a qualifying comparable space port would ever exist, so that any increase in rent would be limited to the RPI. Mr Kirk and Mrs Pritchard had both wished a provision for rebasing the rent, to take account of technological and market developments, to be included in the lease but it was not.

[76] As Mr Findlay had accepted in his cross-examination of Mr Innes, the applicants ought to pay a commercial rent regardless of their status as an economic development agency and that meant payment of the “premium rent” spoken of by Mr Innes, reflecting, among other things, Melness’s “monopoly of place”. Even in the absence of other market demand, location itself was something a tenant would be willing to pay for, as evidenced by the rent payable under the St Kilda lease.

[77] There was difficulty in accepting Mr Meikle’s view that the rent represented the market rent because at an earlier stage, he had signed off his firm’s advice that an annual rent of £45,000 would represent the market rent of the subjects.

[78] Nor should the suitability of Cape Wrath as a site for the facility be seriously considered, since it was currently used as a bombing range by the Ministry of Defence. The evidence was that, notwithstanding the various sites mentioned in the SCEPTRE report, production 28, only three sites in Scotland were under serious consideration for vertical launch facilities; Melness, Unst and Scolpaig in North Uist. The inescapable conclusion was that no other location was both suitable and available for the applicants’ purpose. A tenant looking to develop such a facility would be prepared to pay a significant rent for such a location.The St Kilda lease, for which a rent of £100,000 per annum had been agreed (now worth approximately £165,000) was an example of that.

[79] As Mr Innes had said, what mattered in assessing rent was not the extent of the subjects but the opportunity the location of the subjects offered the tenant, so the best comparable evidence was of leases which most closely resembledthe subjects under consideration and their intended use. This was the approach taken by Mr Innes, while Mr Meikle’s comparable included wind farms, industrial land and electricity sub-stations, none of which enjoyed a monopoly of place.

[80] The draft lease granted by the Garth Estate for the Shetland Space Centre showed a rent of £200,000 per annum being paid for the opportunity to develop a space port on the land in question, with a further £100,000 per annum being paid to the owner of the remainder of the site. The Shetland lease also contained more reasonable break provisions, a requirement that rent would go on being exigible until the site was fully decommissioned and less prescriptive terms regarding what would constitute a comparable for rent review purposes, all of which put the landlords in a stronger position than MCE.

[81] Ms Wilson commended Mr Innes’s suggested rental of £300,000 per annum for the Melness site as being based on the St Kilda rent plus indexation but taking account of the fact that the launching of rockets was permitted, not just tracking.

[82] For these reasons, the Base Rent for the Space Hub site was too low and 50% of it could not constitute fair recompense to the crofters. Further, the prescriptive terms of the rent review clause meant that the landlords could never recover the position.

[83] As to whether the Base Rent was adequately supplemented by the Launch Rent Proportion, that, and the community benefit payment referred to at clause 15.4.1 of the Scheme, was reliant on launch fees being paid to the tenant by a Launch Site Operator. Should the lease be assigned to the operator, as was permitted, it was reasonable to assume that these payments would not be made.

[84] Another reason for which the Court could not be satisfied that the recompense was fair was that the area affected by the development had not been properly identified.

[85] Furthermore, the applicants had failed to consider the effects of the development on grazing and on crofters’ ability to exercise their grazing rights, the effects of the HMP on crofters and the fact that apportionments would not be allowed. These matters not having been addressed, it could not be said that the recompense for their effects was fair.

Decision

[86] Although numerous criticisms are made of the proposed lease, the headline matter here is, of course, rent. The total rent receivable by MCE is of the order of £100,000 per annum, made up of a base rent of £70,000 and the minimum annual Launch Rent of £30,000. Mr Meikle in his first report, production 11, compares that with open market values for comparables comprising both leased and sold subjects, all of them within the Highlands and Islands, including, inter alia, areas of unbuilt industrial land, electricity sub-station sites, a wind farm and the St Kilda lease to the Secretary of State for Defence. His table summarising his comparables is reproduced, with his permission, as an appendix to this opinion. It does not include the Shetland Space Centre because the rent for that was unknown when the table was prepared.

[87] Mr Meikle’s conclusion (at para 10.11) is that “the lease commercial terms proposed by the Applicants represents a value at least equivalent to a Market Rent”. It is not necessary for us to go through the various adjustments he makes to his comparables in order to reach that conclusion because the issue is not with the mechanics of his methodology: it is as to whether his comparables are the right ones and whether he has given enough weight to what Mr Innes calls the site’s “monopoly of place”. Thus, at para 7.13 of his report, Mr Innes says this:

“I note Mr Meikle has given consideration to general values pertaining to land developed for general industrial or commercial purposes in relatively landward locations (Wick, Nigg). Whilst I do not disagree that the Subjects under consideration occupy a remote location, I consider the comparables fail to give cognisance to the suitability of the location for the intended purpose.”

[88] In Mr Innes’s view the correct comparables would be Unst and St Kilda. In relation to the former, he had the advantage over Mr Meikle of knowing the rent that had been agreed for the Shetland Space Centre. In relation to the latter, Mr Meikle’s view (at para 10.9 of his report) was as follows:

“In the case of St Kilda, I anticipate that the landlord had a strong negotiating position, as the owner of the entire island and with the MoD having no obvious alternatives given the location of St Kilda. In the case of the Subjects, other vertical launch sites have been proposed elsewhere in Scotland and I do not consider the landlord of the Subjects to be in a monopoly position.”

[89] In taking that approach, and adhering to it somewhat stubbornly in the course of cross-examination, we think Mr Meikle was underestimating the strength of the Moine’s position as one of only three serious contenders for a space port in the UK and the only one on the northern mainland of Scotland. That this is so is clear from the feasibility report prepared for the applicants by Upper Quartile, a strategic management consultancy, in June 2016 (production 27) which says (at page 54):

“The right to use the land identified for the UKVL [5] site at the Moine is critical to the success of the project, hence a mutually agreeable arrangement will have to be struck with the MCEL. The baseline value of the land is not high, it being given over to rough grazing, and alternative rentals are not a likely option for MCEL. However poor the land is, its unique geographical location represents its value to UKVL.” [Our emphasis]

[90] Similarly the Sceptre Site Assessment Report of February 2017, production 28, in its Executive Summary on page 2, lists, in no particular order, Shetland, The Moine and Scolpaig before going on to what are clearly the also-rans:

“Other sites could be considered, including the island of Lewis in the Hebrides, mainland sites such as Totegan, Durness or Cape Wrath, or a site in the Orkney Isles. Although these each have their advantages, none appear so favourable as the first three.”

[91] It was also known, in advance of the Option Agreement being concluded (on 31 July 2019), that the Moine enjoyed strong UK and Scottish government support, in that HIE had been awarded £2.5 m from the UK Space Agencyto develop the site. Moreover it was known that there were launch operators out there interested in using the site, in the form of Lockheed Martin and Orbex (see production 13, a press release to that effect from the UK government). Accordingly, by the time the Option Agreement was entered into, it was known that this site, although not having a literal monopoly of place, was the only site seriously in contention on the Scottish mainland and the mast to which both governments had nailed their colours.

[92] Having made that criticism of Mr Meikle, we should also comment on Mr Innes’s position. His conclusion is that the Base Rent for Melness should have been “in the order of £300,000/annum”, over and above which there ought to be a premium of five years’ rent “in recognition of the tenant having the ability to break the agreement at the fifth anniversary and every year thereafter” (para 9.8). That is the same rent, as we now know, as has been agreed in Unst. Mr Findlay asked him whether that was just coincidence to which he replied that it was based on a consideration of both the St Kilda and Shetland leases. He could not, however, point to any process of analysis in his report by which he arrived at £300,000 per annum as being an appropriate rent for the Moine. He resisted the notion that the size of site or the number of launch pads and launches was relevant: what was being paid for in Shetland and the Moine was the right to launch rockets and satellites into space and in St Kilda the right to track rockets from the South Uist rocket range.

[93] Although he relied heavily on the rent agreed in Shetland, Mr Innes was unable to tell us very much about how that rent had been arrived at, simply because it had been agreed before he had become involved. His task had been to comment on other aspects of the proposed leases, not the rent. So what his evidence comes to is that £300,000 p.a. would be an appropriate rent for the Moine because it is the rent agreed in Unst and it is appropriate to both because both are involved in the business of launching rockets. We do not consider that that is a sufficiently robust basis on which to build a case for that level of rent for the Moine. For one thing it takes no account of the significant difference in the number of launches possible and permitted as between the two sites. To our mind the number of launches must have a bearing on profitability and profitability obviously has a bearing on the affordable rent. For another, as Mr Findlay pointed out, the likelihood that the Shetland rent is unsustainably high is as great as the likelihood that the Melness rent is unacceptably low.

[94] Our conclusion on the matter of rent is, therefore, that, although doubt can be cast on whether the Melness rent reflects the uniqueness of the site, no credible case has been made that it should be of the same order as the rent to be paid in Unst. The question for us is not whether the best rent possible has been secured but whether their share of the rent actually agreed represents fair recompense to the crofters having regard to the value of the development and its effect on the members of the crofting community in the area affected.

[95] Applying that test, as is always the case in these applications, the recompense on offer here is far in excess of any effect the Scheme is going to have on the crofters, who stand to lose next to nothing by it. In relation to the value of the development no one knows what the financial value of space ports is going to be. This is an industry not so much in its infancy as at a pre-natal stage. Both UK and Scottish governments give very upbeat assessments as to the value to the UK and Scotland of the space industry. For example production 37, a 2015 update on the UK’s Space Innovation and Growth Strategy, talks (at page 5) about a target of a £40 billion space industry to be achieved by 2030, while production 22, A Successful, Fair and Green Economy, tells us that it is the Scottish Government’s ambition to “to have £4 billion of the global space sector market by 2030”. (Neither publication was referred to in evidence but this is uncontroversial.) For our purposes, though, and as we said in our final decision in the Stornoway Wind Farm case (i.e. our decision of 21 July 2021), what matters is not so much overall investment or the value for which projects might change hands, but the profitability of the particular scheme being proposed. On that, we have heard no evidence, except that the rent being offered must reflect a view on the part of the tenant that it is going to be profitable enough for that rent to be affordable.

[96] With both sides having been professionally advised by reputable surveyors and solicitors in a negotiation which led to a significant improvement in the rent on offer, it would take a lot more than we have here to persuade us that the rent agreed is unfair. On the contrary, our conclusion is that it, or, at least, their share of it, represents fair recompense to the crofters.

[97] We should comment specifically on the Launch Rent element of the rent (£30,000 p.a. minimum), standing Ms Wilson’s submission that it might be lost should the lease be assigned to the launch operator.

[98] This is a matter on which we do not appear to have the benefit of submissions from Mr Findlay but the following is our understanding of the matter. The Launch Rent is defined in the lease (at clause 1.24) as “the higher of (1) the sum which is (subject to Clauses 6 & 7) TWO PER CENTUM (2%) (the “Launch Rent Proportion”) of the gross fees paid to the Tenant by the Launch Site operator in respect of Launches from the Space Port excluding VAT or any other taxes which may be payable thereon for each Launch during the year in question (“the Gross Launch Fee Receipts”), and (2) THIRTY THOUSAND POUNDS (£30,000) STERLING in respect of the Year in question”. Should the lease be assigned to a launch operator (as is permitted by clause 21.1, without landlord consent) the payment of launch fees will presumably stop, since the operator will itself be the tenant. So the first alternative of the foregoing Launch Rent calculation would become inoperable. Not so, however, it seems to us, the second, which is just a flat payment of £30,000 per annum. In terms of clause 29.1 of the lease “Notwithstanding any other provision of this Lease or any rule of law to the contrary, the whole terms of this Lease are and are intended to be binding on and enforceable (i) by and against [the Landlords and their successors] and (ii) by and against the said Tenant and, in substitution for them, their permitted assignees as Tenant from time to time (and so forth)”. It appears, therefore, that the obligation to pay £30,000 per annum would survive assignation of the lease. If we have misunderstood the position and that is not the case, then this is something which the applicants should attend to by some sort of supplementary agreement or undertaking because this discussion and its outcome is predicated on a minimum of £30,000 being payable annually to the landlords. Indeed thought should be given as to whether an agreement – based, presumably, on notional launch fees – can be devised which would allow the first part of the Launch Rent calculation to be operable and enforceable in an operator assignation situation.

[99] The lease was also, of course, the target of other criticisms, as to its duration, the paucity of rent reviews, the rent review mechanism and the right of the tenant to terminate annually after 15 years. We are not going to go into the merits of these individual criticisms. Instead we have asked ourselves the question whether, even if it is the case that a 75 year ground lease is uncommon in Scotland and frequency of tenant-only breaks should be reflected in some sort of rental or up-front premium and the rent review criteria are so tightly drawn that a comparable will never be found, all of that makes it unfair for the purposes of section 19A. It may (or may not) be the case that a better deal could have been obtained but it was a deal with which both parties, professionally advised, were happy, as were, it appears, the majority of crofters with shares in the grazings, and we are in no position to say that they were wrong. In that regard it is significant that neither Mr Innes nor Mr Sandbach took their criticisms to the point of saying no surveyor exercising ordinary skill and care could possibly have advised acceptance of the deal. Mr Meikle, on the other hand, positively defended what was done. We bear in mind that he had a dog in the fight in as much as he was defending a deal negotiated by his firm and also Ms Wilson’s criticism that he had earlier signed off on advice recommending a significantly lower level of rent, but Mr Meikle struck us as a thoughtful and considered witness and we are not inclined to set aside his evidence because of those criticisms.

[100] On the whole matter, therefore, we are satisfied that the Scheme offers fair recompense to the crofters in the area affected by it and satisfies the requirements of section 19A(2)(c).

Section 19A(2)(d) – whether the crofting community would be likely to benefit financially and whether such benefit would be at least commensurate with any financial benefit obtained on the development proceeding other than under this section

Applicants’ submissions

[101] Mr Findlay submitted that we could be satisfied as to both aspects of this provision; that is to say that the local crofting community would be likely to benefit financially and that such benefit would be at least commensurate with what would be received on resumption (the only practical alternative to section 19A).

[102] He drew attention to the Community Benefit Fund to be set up in terms of para 15.4.1 of the Scheme into which 1% of launch fees would be paid. There was no legal obligation to create a Community Fund but a general community benefit unrelated to specific impacts could not lawfully be required by way of a planning condition or section 75 agreement (Aberdeen City and Shire SDPA v Elsick Development Co Ltd) and Mr Innes was wrong to suggest otherwise at para 11.1 of his report, as he was to suggest, at para 11.2, that MCE’s share of the rent was not a financial benefit to the crofting community in the area affected by the development. Mrs Pritchard had given clear evidence of MCE’s intention to use its income for the benefit of the community.

[103] Mr Findlay did not understand the second leg of sub-para (d) to be contested, there being no indication of that in the respondents’ answers, but we could be satisfied on this point by Mr Meikle’s evidence in his first report, production 11, which we should prefer to Mr Innes’s.

Respondents’ submissions

[104] Under this head, Ms Wilson adopted what she had already said about the economic and employment benefits of the Scheme (see paras 18 and 19 above).

[105] As to the promised community benefit scheme, she reminded us that Tongue Community Council had requested that contributions from launch fees should be a minimum of whichever was greater, 1% of each launch fee or £5,000 per launch (production 35, para 7.1). However nothing of that kind had been secured whether by way of legal agreement, planning condition or otherwise; instead it was all merely aspirational. Moreover there was a risk that if the lease were to be assigned to a launch operator the 1% of launch fee payment would cease to be payable.

[106] In summary, because community benefit payments had not been made the subject of legal obligations, whether in the lease or otherwise, there was simply no guarantee that they would ever become a reality. In those circumstances we could not be satisfied that the community benefit was likely to be carried out.

[107] As to benefits received by MCE percolating through to members of the community, although Mrs Pritchard had referred to an intention on the part of MCE to set up a charitable trust no steps had actually been taken towards that. Again, the evidence was insufficient for us to be satisfied that this was likely to happen.

[108] As to whether the financial benefit the crofting community would get under the Scheme was commensurate with what it would get if the development proceeded by way of resumption, Mr Meikle, in his attempt to carry out this exercise, had misunderstood the legal test (applying that within section 19A(2)(c), not 19A(2)(d)) and had failed to take into account the effect of the Scheme on crofters’ rights beyond the physical footprint of the development. His calculation had ignored the value of crofters’ rights in the surrounding area (i.e. the area surrounding the footprint of the Scheme infrastructure.) Taking account of these rights would require either that the whole surrounding area be resumed, not just the infrastructure footprint, or that separate agreements be entered into with each crofter and that these agreements be approved by this court under section 5(3) of the Act. Since crofters could not be compelled to enter such agreements, it was unlikely that everyone’s agreement would be obtained. For these reasons the Court could not be satisfied as to the second leg of the test either.

Decision

[109] What we are talking about in terms of para (d) of section 19A(2) is financial benefit to the crofting community in the area affected by the development. That can take a variety of forms. We have already dealt with financial benefit in the way of employment opportunities in the local area at paras 23 to 29above. The other ways in which financial benefit to that community might result from this scheme are (a) the use by the MCE Board of its share of the rent for the good of the community and (b) the payment of 1% of each launch fee into a community benefit grant scheme. What is said by the respondents is that, for different reasons, we cannot be satisfied that such benefit will in fact result.

[110] The reason the first is distrusted is the respondents’ scepticism as to the willingness and ability of the MCE Board to use the rent received for the good of the community. In his statement Hamish Mackay says there has been no benefit to the community from MCE’s management and that no profit has been applied for local purposes. He goes on to say that he is worried about what will happen to the money but it appears that his concern has to do with a few families, all represented on the MCE Board, receiving more money than other crofters because these “two or three families have taken over any available crofts and the grazing shares”, rather than with financial malfeasance. Lea Anker gave evidence as to her own unhappy time on the Board of MCE but none of her evidence goes as far as to suggest financial impropriety: again her complaint seems to be that a few families dominate the Board to the exclusion (as she sees it) of others. Mr Reid and Mr Lowe do not mention this at all.

[111] Mrs Pritchard, contrastingly, gave evidence of positive benefits brought about by the MCE Board, the most substantial of which was the provision of six social housing sites for young people but also the investigation of the possibility of erecting a wind turbine (which ultimately came to nothing) and payments towards school pantomime trips and the like. She explained that they survived “on a shoestring”, their only income being the crofters’ rents (probably minimal notwithstanding a rent review carried out by the previous owner before gifting the land to the community), the rent from a sporting lease and the rent from an office building leased to the NHS. Whilst we don’t know what that income amounts to, we imagine that Mrs Pritchard’s description of surviving on a shoestring is not far off the mark and we have no basis for holding that, were additional funds available, as from the Space Hub, they would not be used for the good of the Melness community.

[112] So far as the launch fee is concerned, it is true that there is, presently, in place no legal obligation to pay the same. Mr Kirk himself, at para 52 of his statement (production 81), refers to the creation of a community grant scheme as an “aspiration” but in oral evidence he said that HIE regarded the keeping of their word as a reputational matter. For our part, we have no basis for holding that they are unlikely to deliver what they promised; rather our conclusion is that when a public body makes a statement of intent of this kind we can be satisfied that, other things being equal, it will be delivered. Accordingly, we are satisfied that the Scheme is likely to deliver financial benefit to the crofting community in the area it affects.

[113] As to whether that benefit will be commensurate to what might be achieved on resumption, the applicants rely on the evidence of Mr Meikle. Ms Wilson submitted that he had applied the wrong test – that pertaining to para (c) of section 19A(2) rather than para (d) but we do not think so. What para (c) contemplates is the resumption of land from a crofter’s inbye land, not common grazings (see our preliminary decision in the Stornoway Wind Farm case dated 1 March 2019 at paras [49] to [54]) and there is no suggestion in Mr Meikle’s report that he is contemplating that situation.

[114] The first step in the comparison between what the financial benefit which the members of the crofting community stand to get from the Scheme and what they would stand to get on resumption is to arrive at a market value for the land being resumed. For that purpose Mr Meikle again relies on the comparables used to arrive at a market rent for the subjects, set out in his Table 4 appended to this opinion, arriving at a value of £500,000 for the 13 acres of land occupied by infrastructure, inclusive of “attendant rights over a surrounding area” (para 13.11). He capitalises the rent payments, inclusive of the minimum launch fee figure of £30,000, over a period of 75 years and applying a 6% discount to the Base Rent and 8% to the Launch Rent, at approximately £1.5m. He also produces a calculation capitalising the rent over a period of five years (because of the right to break the lease at that point and annually thereafter) including the break clause penalty of £70,000 and a provision for buildings which would probably remain on site and be rented out by MCE earning around £55,000 per annum in rent, all of which produces a capitalised value on £920,000. Even that figure is substantially in excess of his market value for the land on sale. So, on Mr Meikle’s figures the crofters might expect to share £250,000 if the development went ahead by way of resumption and very substantially more if it goes ahead under section 19A.

[115] There are, however, two problems with a resumption comparison in this case. Ms Wilson identified one of them when she pointed out that resumption of the 13 acres occupied by infrastructure would not carry with it incidental rights over the rest of the Space Hub Site. In order to be able to exercise the whole rights needed for this development the whole Space Hub Site would have to be resumed. But that brings us up against the second problem which is that it is extremely unlikely that the Court would consent to resumption of such an extensive area of grazing because to do so would be seriously inimical to the future of crofting in Melness.

[116] This second problem raises the question of what sort of comparison we are required to make as between section 19A and section 20; is it a hypothetical one or one anchored in the real world? Are we to compare a real section 19A application with a hypothetical section 20 application for resumption which is presumed to be successful notwithstanding the practical and legal difficulties which might lie in its way on the facts of a particular case? Section 20 of the 1993 Act is in need of reform to clarify what powers, if any, this court has to refuse resumption once a reasonable purpose in relation to one of the interests listed in subsection (1) has been established but there is no doubt that it has been interpreted by the Court as broad enough to allow (perhaps, even, to require) a balancing act to be carried out in respect of these various interests (see the Deputy Chairman and Mr Campbell’s discussion of this at paras [20] to [34] of Glen Spean Estate v MacLachlan).

[117] This is not the first time we have come up against this problem. In the Stornoway Wind Farm decision of 1 March 2019 we made the point (at paras [72] to [75]) that the comparison required by section 19A(2)(d)(ii) must be with a scheme which is in the landowner’s power to deliver and therefore ruled out a comparison with a section 50B scheme. That was an example of confining the scope of the comparison to the real world, albeit in a context where the comparison was not with resumption. Similarly in our final order in that case, dated 21 July 2021, (at paras 126 and 127) we confined the comparison with resumption which was being made in that case in respect of land covered by crofter forestry to the actual facts of the case. Resumption of such land is not competent while still used as woodlands – section 20(5) of the 1993 Act – but we were asked to assume that an agreement had been reached to clear the land of trees and to hold that the ransom value of such an agreement should be included in the comparison. We declined to do so because the fact of the matter was that it was still crofter forestry land at the time of our decision and therefore incapable of being resumed.

[118] Consistently with that approach, in this case we decline to make a comparison with a situation in which we do not consider that resumption would in fact be authorised. Indeed, standing the facts of this case and the availability of section 19A it is almost inconceivable that any landowner would proceed by way of resumption because section 19A offers a much more elegant and less disruptive solution. If, however, we are required to ignore the existence of section 19A for the purposes of the comparison, we can say with some confidence that resumption would in any event almost certainly be refused because, as we have said, the loss of such a large area would be seriously detrimental to the future of crofting in Melness. In these circumstances we do not consider that section 19A(2)(d)(ii) requires us to make – or insist on applicants leading evidence of – such an artificial comparison.

[119] In those circumstances we are satisfied that the requirement of section 19A(2)(d)(ii) is satisfied but, referring back to the discussion at para 98 above, we would counsel the applicants to do something to address the risk of the launch fee element being lost should the lease be assigned to an operator.

Decision

[120] For these reasons we have decided to grant the application. We have allowed 21 days for written motions and submissions on expenses.

Postscript

[121] In the course of the hearing a question arose as to who was truly driving opposition to this application, the three named respondents or Mr Anders Polvsen, the Danish billionaire who is funding them. The question arose because there seemed to be such a disconnect or, at best, as Mr Findlay put it, such a narrow bridge between the respondents’ evidence and the case being advanced on their behalf. In a sense that does not matter to the Court, since we require to satisfy ourselves that the statutory tests are satisfied, opposition or no opposition, but it troubled Mr Findlay sufficiently to reserve his right to return to it in relation to expenses, so we might have to say something more about it then.

Appendix
Summary of Comparable Transactions

The relevant comparisons can be summarised as follows.

Table 4 – summary of comparable transactions
COMPARABLE DESCRIPTION RENT /SALE PRICE COMMENTS
Industrial Land Site 44 Wick Airport Industrial Estate

1.4 acres

Available at £4,200 pa £3,000/acre pa
Industrial Land Part Nigg Fabrication Yard

98 acres let from 14 October 2011 for 60 years

£225,000 pa £2,300/acre pa

Information extracted from Registers of Scotland.

Electricity Substation Sites Sample sites

Size ranges from 20-50 acres

Say £20,000 - £37,500 pa Based on a typical total compensation package of £0.4m - £0.75m and decapitalised at 5%
Electricity Substation Sites Melgarve, Laggan £121,000 30 acres sold to SSE in October 2016 (£4,000/acre)

Information from Registers of Scotland

Electricity Substation Sites Loch Buidhe £177,880 123 acres at Loch Buidhe substation sold to SSE in October 2014 (£1,447/acre)

Information from Registers of Scotland

Electricity Substation Sites Spittal, Thurso £304,490 106 acres at Spittal sold to SSE November 2013 (£2873/acre)

Information from Registers of Scotland

Foreshore Agreements Rights to develop on or cross foreshore Ranges according to value of adjacent user or on tonnage basis. Rental values intrinsically linked to value of the opportunity on adjacent land.
Wind Farm Assume 20MW generating capacity Base - £60,000

Variable – up to £110,000

Annual rent is the higher of these figures – the variable rent depends on output and electricity prices
Military Facilities Lease of various areas of land at St Kilda £100,000 pa Lease from NTS to Secretary of State for Defence. 25 years from May 2003. Rent understood to be fixed (ie not subject to any review mechanism).
Non-occupation agreements Various areas totalling 2,762 acres leased by institutional landowner to conservation charity £1,720 pa (passing rent) Lease for 25 years from 28 November 2001 for the purposes of controlling/managing the habitat for the benefit of protected species

Five yearly rent reviews to RPI

£0.62/acre pa

Non-occupation agreements Lease of 531 acres of land for the purposes of managing habitat £435 pa Lease by institutional landlord to local authority

£0.82/acre pa

Non-occupation agreements Lease to conservation organisation of two areas of foreshore totaling 1,470 acres £960 pa (passing rent) Five yearly rent reviews to RPI

£0.65/acre pa

© Clive Meikle


[1] A company limited by guarantee and the vehicle by which the Melness Estate, gifted to the community by its previous owner, Mr Michael Foljambe, in 1995, is run. It is entirely owned by crofters having shares in the Melness Common Grazings, of whom there are 57.

[2] Particularly the Space Industry Regulations 2021 (SSI/2021/No 792) which came into effect on 29 July 2021.

[3] Sutherland Space Hub

[4] It is also noteworthy that government support for agricultural activity is changing so as to be increasingly focused on environmental protection and enhancement as opposed to livestock numbers. That change of emphasis is unlikely to lead to an increase in livestock in the crofting communities and, therefore, increased pressure on grazings and soumings.

[5] United Kingdom Vertical Launch