Milk quotas — Negligence — Adverse decision by tribunal on plaintiff’s application for hardship relief — Whether advice that plaintiff would have failed in challenging tribunal’s decision negligent — Effect of partnership arrangements — Meaning of producer — Meaning and effect of para 17(3)(a) of Schedule 2 to the Dairy Produce Quotas Regulations 1984 — Plaintiff’s claim dismissed
the plaintiff and his wife entered into a partnership with the owner of Manor
Farm, Thornton Steward, Ripon, Mr A J Crossley, subject to termination on 12
months’ notice — Mr and Mrs Stubbs contributed as capital their dairy herd and
milking plant — Following notice given by Mr and Mrs Stubbs the partnership was
dissolved on April 30 1984 and they moved part of their dairy herd to
Broadmires Farm, a farm belonging to Lord Swinton — The plaintiff was permitted
to graze his milking cows on Broadmires Farm, first under two grazing licences
and then, from October 11 1984, pursuant to a partnership agreement between the
plaintiff and a company belonging to Lord Swinton — Broadmires Farm and
adjacent land was leased to the partnership and both partnership agreement and
lease were drafted so as to enable Lord Swinton to bring the joint venture to
an end by 12 months’ notice — The Dairy Produce Quota Tribunal rejected the
plaintiff’s exceptional hardship claim for milk quota to be determined for
himself at Broadmires Farm on the ground, inter alia, that the ‘producer’ at
the farm was the plaintiff and Lord Swinton, as partners, and that the
‘producer’ had not prior to April 2 1984 entered into any transaction and
arrangement as fell within para 17 of Schedule 2 to the Dairy Produce Quotas
Regulations 1984 — In giving legal advice to the plaintiff, the National
Farmers Union stated that the plaintiff could not be advised to challenge the
decision of the tribunal as, inter alia, the only transaction or arrangement
which the plaintiff entered into prior to April 2 1984 was the dissolution of
the first partnership and that did not show an intention to go into or remain
in business as a producer
claim was dismissed — If the only issue in the way of a successful challenge of
the tribunal’s decision was whether the plaintiff had established that, when he
gave notice terminating the first partnership, he ‘intended to go into or
remain in business as a producer’, judicial review should have been sought — On
April 2 1984 the plaintiff was not himself a producer but he and his wife were
members of a partnership under the first partnership and the partnership was the
producer — Accordingly, the plaintiff was not a person to whom article (1)(c)
of Council Regulation 857/84 applied and therefore could not make a claim for
exceptional hardship under para 17 of Schedule 2 to the 1984 regulations — The
notice to terminate the first partnership was not a transaction or arrangement
that had either of the consequences provided for by para 17(3)(a) of Schedule 2
to the 1984 regulations — The plaintiff suffered prejudice not because he had
been deprived of quota but because he chose to leave a partnership that
occupied land that had a history of use for dairy farming and was thus entitled
to quota — The 1984 regulations do not cater for hardship arising in these
circumstances
No cases are
referred to in this report.
This was a claim
by the plaintiff, Francis Stubbs, against the second defendant, the National
Farmers Union, alleging negligent advice and claiming damages. The claim
against the first defendants, Hunt & Wrigley, of Northallerton, solicitors,
was discontinued.
Richard
Seymour QC (instructed by Ward Hadaway, of Newcastle upon Tyne) appeared for
the plaintiff; Stuart Isaacs QC (instructed by Lloyd Cooper) represented the
second defendant. The first defendants, Hunt & Wrigley, did not appear and
were not represented.
Giving
judgment, PHILLIPS J said: On July 24 1984 the United Kingdom brought
into force regulations under which milk quotas were allocated to British dairy
farmers. Thereafter those who produced milk without, or in excess of, such
quotas became liable to pay a levy. The size of this levy soon rendered
uneconomic the production of milk which did not fall within a quota. This was
in accordance with the intention of the European Community scheme under which
quotas were introduced.
Francis
Stubbs, the plaintiff, had been a dairy farmer all his life. When milk quotas
were introduced he applied for one. His application was rejected by the Dairy
Produce Quota Tribunal (‘the tribunal’). He sought the advice of the second
defendants (‘the
judicial review. The NFU advised against this course and Mr Stubbs did not
pursue it. In this action he claims that the advice given by the NFU was
negligent. He contends that the tribunal erred in law and that, had he received
proper advice, he would successfully have challenged the tribunal’s decision
and obtained a quota. He claims, as damages flowing from the NFU’s negligence,
the loss that he has sustained as a consequence of failure to obtain a milk
quota.
The facts
Mr Stubbs
devoted himself to dairy farming from the time that he left school at the age
of 15. He married when he was 21. His wife shared with him the tasks that dairy
farming involved and he treated her as an equal partner in his farming
business. He owned no land and carried on business by persuading landowners to
join with him and his wife as partners in the business of dairy farming. In a
succession of partnerships, the landowner provided the land and the plaintiff
and his wife provided the livestock that formed the basis of the partnership’s
dairy herd and took responsibility for the management of the dairy business.
In May 1982 Mr
and Mrs Stubbs entered into a partnership with Mr A J C Crossley to farm Manor
Farm, Thornton Steward, near Ripon. Mr Crossley had purchased this farm from
its previous owners, with whom Mr and Mrs Stubbs had had a similar partnership.
The following terms of the partnership are material:
(1) Mr and Mrs Stubbs contributed as capital
their dairy herd and milking plant (‘live and dead stock’).
(2) Mr Crossley contributed a sum equal to the
value of this live and dead stock.
(3) The management of the partnership business
was shared on the basis that Mr Crossley was responsible for matters relating
to cropping and grassland and Mr Stubbs for matters relating to the dairy herd.
(4) Profits were shared (broadly) as to one half
to Mr Crossley and one quarter each to Mr and Mrs Stubbs.
(5) Any partner was entitled to retire from the
partnership on 12 months’ notice whereupon (in effect) Mr and Mrs Stubbs were
obliged to vacate Manor Farm.
(6) Upon dissolution of the partnership Mr Stubbs
had the option to purchase all the female dairy livestock and take the same as
part of his partnership capital.
Mr and Mrs
Stubbs had difficulty in working in partnership with Mr Crossley and, in April
1983, they gave notice to terminate the partnership on April 30 1984.
It was Mr and
Mrs Stubbs’ intention to take their share of the partnership capital in
specie and to move their herd to other land. To this end Mr Stubbs had,
before giving notice to dissolve the partnership, entered into negotiations
with Mr Stanton, the agent of Lord Swinton. Lord Swinton had land on which
dairy cattle had been farmed some seven or eight years previously and Mr Stubbs
was led to believe that there was a good chance that he and his wife would be
able to continue dairy farming from Lord Swinton’s land. In about February 1984
Mr Stubbs entered into an oral agreement with Mr Stanton under which he was
granted a grazing licence on Broadmires Farm on Lord Swinton’s estate. This
farm extended to some 72 acres and the intention was that, when the Manor Farm
partnership terminated, Mr Stubbs would bring at least part of the Manor Farm
herd to Broadmires Farm and graze them there, pending the conclusion of a
partnership agreement with Lord Swinton in October. In fact, though Mr Stubbs
may not have known this at the time, the trustees of Lord Swinton’s estate had
insisted on advertising Broadmires Farm to let on a partnership basis in order
to make sure that there was no alternative tenant more attractive to the estate
than Mr Stubbs.
When the Manor
Farm partnership was dissolved at the end of April 1984, Mr and Mrs Stubbs took
as their share of the partnership capital, or part of it, 55 milking cows and
about 30 followers. The rest of the herd, which by this time had risen in
number to 80 milking cows and 90 followers, was sold. Mr Stubbs moved his 55
milking cows to Broadmires Farm. The farm was not large enough to support the
followers, and these he put to graze on land belonging to a relative. A formal
grazing agreement dated February 15 1984 was drawn up, granting Mr Stubbs
grazing rights until September 1. This was then renewed until October 11 1984. As
from that date Mr Stubbs went into a partnership on terms that were
subsequently incorporated in two contracts dated November 6 1984. The first of
those contracts was a partnership agreement between Mr Stubbs and the Healey
Farming Co, Lord Swinton’s corporate vehicle. The other was a lease under which
Lord Swinton leased to the partnership both Broadmires Farm and the adjacent
Sykes Farm — the two comprising 186 acres. The contracts had been skilfully
drafted so as to enable Lord Swinton to bring the joint venture to an end by
giving 12 months’ notice of determination of the lease. Mr Stubbs was entitled
to give 12 months’ notice of determination of the partnership.
In August 1984
Mr Stubbs submitted a claim for milk quota to the tribunal. The hearing took
place in September and the claim was rejected. Mr Stubbs then joined the NFU
with the specific intention of seeking from them advice as to whether he could
challenge the tribunal’s decision. His case was considered by the NFU legal
division and, in particular, a barrister employed by that division, Miss Diane
Smith. She advised that a challenge was unlikely to succeed and, discouraged by
her advice, Mr Stubbs took the matter no further. Without quota, dairy farming
on Broadmires and Sykes Farm was unprofitable and in June 1986 the dairy herd
was sold for £18,000. The partnership continued but devoted itself to sheep
farming and livestock rearing, without financial success. Mr Stubbs’ claim is
put forward on the basis of his actual financial position as compared with the
position he would have enjoyed had he been granted a milk quota of, initially,
300,000 litres pa.
The
principal issue
The NFU have
accepted that they owed Mr Stubbs a duty to exercise reasonable care when
giving him advice. They have based their defence essentially upon the
contention that the advice given by Miss Smith was correct. They have argued,
through Mr Isaacs QC, that the tribunal’s decision could not have been
successfully attacked on a judicial review and that Miss Smith was correct so
to advise. In considering this submission I have, in effect, had to put myself
in the position of the court hearing an application for judicial review. This
has involved scrutiny of regulations of some complexity.
European
Council regulations
The United
Kingdom regulations, which governed Mr Stubbs’ application for milk quota, were
made pursuant to European Council regulations. In order properly to interpret
the former it is necessary, first, to consider the latter.
Council
Regulation (EEC) No 856/84
This
regulation provided for the introduction of the quota scheme with which this
action is concerned. The preamble made it plain that the object of the scheme
was to deal with a structural imbalance in the community between supply and
demand for milk leading to surpluses and commented:
4. Whereas a
careful examination of the different possible ways of re-establishing balance
in the milk sector shows that, despite the administrative difficulties which
its implementation may involve, the most effective method, and the one having
the least drastic effect on the incomes of producers, is the introduction for
an initial period of five years of an additional levy on quantities of milk
delivered beyond a guarantee threshold.
The regulation
proceeded to insert into an earlier regulation, 804/68, dealing with milk
production, article 5c, which provided:
1. During
five consecutive periods of 12 months beginning on 1 April 1984, an additional
levy payable by producers or purchasers of cows’ milk shall be introduced. The
objective of the said levy shall be to curb the increase in milk production
while at the same time permitting the structural developments and adjustments
required, having regard to the diversity of the situations among individual
Member States, regions and collection areas in the Community. However, the
first period shall start on 2 April 1984.
The levy
system shall be implemented in each region of the territory of the Member
States in accordance with one of the following formulas:
Formula A
A levy shall
be payable by every milk producer on the quantities of milk and/or milk
equivalent which he has delivered to a purchaser and which for the 12 months
concerned exceed a reference quantity to be determined.
Council
Regulation (EEC) No 857/84
This
regulation, dated March 31 1984, implemented article 5c. The preamble
commented:
Whereas the
scheme must, as a matter of overwhelming public interest, enter into force on 2
April 1984; whereas, to this end, transitional measures must be adopted so that
the levy due from 2 April onwards can be collected reasonably promptly.
The regulation
provided as follows:
Article 2
1. The
reference quantity referred to in Article 5c(1) of the above mentioned
Regulation shall be equal to the quantity of milk or milk equivalent delivered
by the producer during the 1981 calendar year (formula A) . . .
Article 4
1. In order
to complete the restructuring of milk production at national or regional level
or at the level of the collecting areas, the Member States may, in connection
with the application of formulas A and B:
(a) grant to producers undertaking to discontinue
milk production definitively compensation paid in one or more annual payments;
(b) grant an additional reference quantity to
producers realising a milk production development plan approved after the entry
into force of this Regulation under Directive 72/159/EEC, on condition that
this plan meets the criteria referred to in Article 1(2) of Regulation (EEC) No
1946/81;
(c) grant producers undertaking farming as their
main occupation an additional reference quantity, whether their herd fulfils
the conditions set out in paragraph (b) or not.
2. The
reference quantities freed shall, as necessary, be added to the reserve
referred to in Article 5.
. . .
Article 5
For the
purpose of applying Articles 3 and 4, additional reference quantities may be
granted only within the guaranteed quantity limit . . .
. . .
Article 7
1. Where an
undertaking is sold, leased or transferred by inheritance, all or part of the
corresponding reference quantity shall be transferred to the purchaser, tenant
or heir according to procedures to be determined.
. . .
Article 12
For the
purposes of this Regulation the following meanings shall apply:
. . .
(c) producer: a natural or legal person or group
of natural or legal persons farming a holding located within the geographical
territory of the Community:
— selling milk
or other milk products directly to the consumer, and/or
— supplying
the purchaser.
(d) holding: all the production units operated by
the producer and located within the geographical territory of the Community;
These
definitions were incorporated in the UK regulations, to which I now turn.
The Dairy
Produce Quotas Regulations 1984 (‘the UK regulations’)
The UK
regulations [SI 1984 No 1047] were made on July 23 1984 and came into operation
on July 24 1984 (‘the operative date’). I have already said that the UK
regulations incorporated the definitions in article 12 of Regulation (EEC) No
857/84. The only additional definition that I need refer to is the following:
‘wholesale
quota’ means —
(a) the quantity of dairy produce which may be
delivered by wholesale delivery, from a holding in a region in which Formula A
is implemented, in a quota year without the producer in occupation of that
holding being liable to pay levy.
The
regulations governing wholesale quota are set out in Schedule 2. The relevant
paragraphs of this schedule provide as follows:
1. (1) Subject to subparagraph (3) each applicant
shall no later than the date five weeks after the operative date (or, in a
region for which Formula A is implemented, four weeks after the operative date)
submit his application for primary wholesale quota to the Minister on a form
(as specified in subparagraph (2)) duly completed by him or under his
authority.
. . .
(2) The form referred to in subparagraph (1)
shall be provided on request by the Minister and shall require an applicant to
provide —
(b) a statement that on 2nd April 1984 the
business of the direct sale or wholesale delivery of dairy produce was being
carried on from land within the identification of the holding occupied by him
on the date of his application.
Paras 2 to 5
make provision for the calculation of primary wholesale quota relating to
holdings on the basis of historic production from the holdings in question.
Part II of the
Schedule deals with ‘Registers, Running Regional Wholesale Reserve and
Exceptional Hardship Claims’. Its provisions include the following:
14.(1) The Minister shall prepare in respect of each
producer a wholesale register entry, dated as at the operative date and setting
out —
(a) his name,
(b) his wholesale quota, and
. . .
(d) an identification of his holding,
15.(1) The Minister shall maintain —
(a) a wholesale register (being a register of
entries referred to in paragraph 14), and
(b) a register of particulars of wholesale
deliveries by each producer.
. . .
16.(1) A running regional wholesale reserve may be
created . . .
17.(1) The Minister may make available from the
running regional wholesale reserve an exceptional hardship provision to be used
in satisfaction of exceptional hardship claims in accordance with the following
provisions of this paragraph.
(2) For the purpose of this paragraph
‘exceptional hardship claim’ shall be construed in accordance with subparagraph
(3), and ‘claimant’ shall be construed accordingly.
(3) An exceptional hardship claim shall be a
claim by a person to whom Article 4(1)(c) of Council Regulation 857/84 (which
deals with producers undertaking farming as their main occupation) applies that
—
(a) before 2nd April 1984 he has entered into, or
become obliged to enter into, a transaction or made an arrangement —
(i) as a result of which his wholesale quota is
substantially less than it would have been had he not entered into or become
obliged to enter into that transaction or made that arrangement, or
(ii) the reasonably expected outcome of which is a
level of wholesale delivery of dairy produce in respect of which, or a
substantial part of which, wholesale quota is not otherwise capable under these
regulations of being allocated to him.
(b) at the time of entering into or becoming
obliged to enter into that transaction or making that arrangement, he intended
to go into or remain in business as a producer,
(c) he has not received, and will not receive or
become entitled to receive, as a result of that transaction or arrangement,
benefit reasonably commensurate with the want of wholesale quota to which his
exceptional hardship claim relates,
(d) as a result of the matters specified in the
preceding paragraphs of this subparagraph, he has suffered or will suffer
exceptional hardship in comparison with producers in general, and
(e) it is fair and reasonable that he should be
allocated wholesale quota as a result of his exceptional hardship claim.
. . .
(5) The Tribunal shall determine for any claimant
who satisfies them of the matters referred to in subparagraph (3) his gross
additional wholesale quota (including cumulative quarterly wholesale quotas),
being the quantity of dairy produce which the Tribunal determines is justified
by his exceptional hardship claim.
Part III of
the Schedule deals with changes of occupation of holdings after the operative
date. The effect of its provisions is that the quota remains with the holding
and is transferred with it to the new occupier of the holding.
Mr Stubbs’
application for hardship relief
In making his
claim Mr Stubbs was assisted by a solicitor and an accountant. The former was a
partner in the first defendants, against whom proceedings have been
discontinued. Mr Stubbs told me that his solicitor was clearly out of his
depth. I have no difficulty in accepting this, for he was navigating in very
deep and largely uncharted waters.
Mr Stubbs
submitted his claim on a form designed to be used by applicants for one or more
of the following: direct sales quota; special case treatment; outgoers scheme.
It does not
seem to me that this was an appropriate form for an application for wholesale
quota on the ground of exceptional hardship and it seems plain that Mr Stubbs
was in some confusion as to the basis upon which he was seeking relief. To the
tribunal that confusion must have been accentuated by the manner in which the
application form was completed. In particular:
(1) Mr Stubbs stated that his business title was
‘F J & L Stubbs’, ie Mr Stubbs and his wife.
(2) Mr Stubbs applied in relation to Broadmires
Farm.
(3) Mr Stubbs described his status as that of
‘partner’.
(4) Mr Stubbs stated he was a tenant of
Broadmires Farm.
(5) Mr Stubbs stated ‘we rent 186 acres from
Swinton Estate’.
(6) Mr Stubbs claimed that before March 1 1984 he
made significant capital investments aimed at increasing milk production on his
holding. These included the value of his 55 cows and items of equipment
purchased both before and after March 1 1984.
(7) Mr Stubbs stated that on April 2 1984 he was
carrying on the business of direct sale and/or wholesale sale of dairy produce
from Broadmires Farm.
Mr Stubbs
included in his statement, however, a narrative which gave a fair picture of
events as I have tried to describe them, save that it did not state that Mr
Stubbs was farming at Broadmires Farm under a temporary grazing licence, but
stated:
In the Spring
of 1984 I reduced my herd to 55 cows and followers (about 138 in all) and took
the herd to Broadmires Farm, Ilton, Masham, going into partnership with the
owner, Lord Swinton. This farm does not have any milk quota.
He went on to
state that a quota had been allocated to the Manor Farm partnership and ended:
In view of
the fact that there has been no milk production at Manor Farm since 1st May
1984, which was the day I left, I wish to apply for the whole of the above
quota to be transferred to Broadmires Farm where the dairy herd from Urevale
Farms is now located and where I am now farming.
The
decision
Mr Stubbs’
application was heard by a tribunal chaired by Lord Grantchester himself. I
must read the tribunal’s decision in full:
DECISION
The Tribunal
rejects the application made by Mr Stubbs for additional quota to be allocated
on grounds of exceptional hardship in respect of the holding known as
Broadmires Farm and Sykes Farm, Ilton, Masham, Ripon in Yorkshire, which
holding is registered under the number 50/719/19.
REASONS
1. Broadmires
Farm and Sykes Farm are part of Lord Swinton’s estates. No milk was being sold
or delivered from these two farms in the period of twelve months ending on the
2nd April 1984, and no quota has been allocated or provisionally allocated in
respect of either of them.
2. For some 9
years prior to, and ending on, the 30th April 1984 Mr Stubbs carried on the
business of dairy farming at Manor Farm, Thornton Steward, in partnership with
the landowner, Mr A J C Crossley. In April 1983 in consequence of a dispute Mr
Stubbs gave notice terminating that partnership with effect from 30 April 1984.
Accordingly he had to vacate Manor Farm on the 1st May 1984.
3. In
February 1984 Mr Stubbs entered into an oral arrangement with Lord Swinton
under which they agreed to become partners in the business of dairy farming at
Broadmires and Sykes Farms with effect from the 1st October 1984. Later that
month Mr Stubbs ordered a bulk milk tank and milking equipment, and some minor
alteration to be done to the cow byre and milk house on the farms for which he
paid sums totalling £5,276 in May 1984.
4. Mr Stubbs
moved his herd of 55 cows from Manor Farm at Thornton Steward to Broadmires and
Sykes Farms on the 1st May 1984. Since then he has been delivering milk to the
Milk Marketing Board from Broadmires Farm. No formal partnership agreement
between him and Lord Swinton has been produced to us. We hold that it has been orally
agreed that a partnership will commence in October 1984 (that is to say, at a
future date). We understand that it has also been agreed that, under the
proposed partnership agreement, either party will be able to terminate the
partnership on 12 months notice, whereupon Mr Stubbs will be required to vacate
Broadmires and Sykes Farms with his animals and his belongings. Mr Stubbs has
not yet moved into either of the farm buildings as Broadmires Farm building is
now being renovated for him to occupy.
5. Mr Stubbs
initially applied for the milk quota of 447,776 litres or thereabouts
allocated, or provisionally allocated, in respect of Manor Farm to be
transferred to Broadmires Farm. We have no power to direct any such transfer on
any grounds.
6.
Alternatively Mr Stubbs now applies for a quota of 447,776 litres per annum to
be determined for himself at Broadmires Farm on the grounds of exceptional
hardship. We decline to make any such determination. First, in our judgment,
the ‘producer’ at Broadmires Farm for the purposes of the Dairy Produce Quotas
Regulations 1984 (SI No 1047) is Mr Stubbs and Lord Swinton, as partners. In
our view, such ‘producer’ did not, prior to 2nd April 1984, enter into any
transaction or arrangement, or become bound to enter into any transaction or
arrangement, of the nature specified in provision (a) of sub-paragraph 17(3) of
the Second Schedule to such Regulations. Furthermore we have no evidence that
either partner individually entered into such a transaction or arrangement
prior to that date, excepting the purchase by Mr Stubbs of the bulk tank
milking equipment (which remains his property) and the minor alteration done by
him after 2nd April 1984 to the cow byre and milk house. In our judgment such
matters by themselves are not sufficient to satisfy the requirements of such
provision (a).
7. This
Tribunal consider that, in its judgment, neither Mr Stubbs nor Lord Swinton
either individually or together as partners has or have suffered, or will
suffer, exceptional hardship in comparison with producers in general.
8. In our
considered judgment, it is neither fair nor reasonable that quota should be
determined for a producer in respect of a holding where (a) the holding was not
in milk production on the 2nd April 1984, (b) the producer is a partnership
which has not yet commenced in business, (c) the partnership has no security of
tenure, and (d) the partner carrying on the day to day farming operations on
the holding with his cows can be required to leave it at 12 months notice or
less, and (e) it is alleged that exceptional hardship is being or will be
suffered by the partner carrying on the day to day farming operations on the
holding, which he began to occupy only after the 2nd April 1984 without then
being bound or obliged so to do.
The NFU’s
advice
Miss Smith set
out her conclusions in respect of the tribunal’s decision in a memorandum which
was passed on to Mr Stubbs.
Miss Smith
made a number of criticisms and raised a number of queries in respect of the
tribunal’s decision, but the most important passages in her advice were as
follows:
I do not think
that Mr Stubbs would be very well advised to challenge the decision of the
Dairy Produce Quota Tribunal by an application to the High Court. My reasons
for saying this are that, although the Tribunal may have been wrong in some of
its conclusions (which I will deal with later) I do not think these errors, if
indeed they are errors, have affected the decision it has reached. Furthermore,
even were a Court to direct the Tribunal to re-consider the matter the Tribunal
could still reach the same conclusion having correctly appreciated the facts,
because the determining factors in granting exceptional hardship status are
that the producer has suffered exceptional hardship in comparison with producers
in general and that it is fair and reasonable that quota should be given. The
Tribunal were quite clear in their decision that it is not fair and reasonable
that quota should be determined for a producer in respect of that holding (see
paragraph 8 of the decision).
It is true
that Mr Stubbs did make an arrangement which has caused his quota to be
substantially less than it otherwise would have been, that arrangement being
the giving of notice and termination of the partnership with Mr A J C Crossley.
However, in order to rely on this arrangement as a qualification for an
exceptional hardship claim Mr Stubbs needs to show an intention to go into or
remain in business as a producer, such intention to have existed at the time
the arrangement was made. Although this may have been Mr Stubbs’ intention
there is no evidence that it was. The keeping of cows would not be sufficient
as these could always be sold at any time. There is nothing in Mr Stubbs’
statement attached to the documents sent to me indicating that there is
evidence of such intention.
. . . the
only transaction or arrangement which seems to have been entered into prior to
2nd April 1984 is the dissolution of the old partnership and there appears to
be no evidence shown to the Tribunal that on that dissolution Mr Stubbs
intended to remain in business as a milk producer.
I am sorry I
cannot really offer any hope to Mr Stubbs in the application he has made for
secondary quota but I shall be happy to advise further if you feel this may be
helpful.
Mr Stubbs’
case
In his helpful
written argument Mr Seymour QC set out Mr Stubbs’ case for an allocation of
quota under para 17(3) of Schedule 2 to the UK regulations as follows:
(i) Mr Stubbs was a person to whom Article
4(1)(c) of Regulation 857/84 applied because he was, as at 24th July 1984 and
thereafter until he entered into partnership with Healey, himself undertaking
farming as his main occupation;
(ii) Mr Stubbs had, before 2nd April 1984, entered
into a transaction or made an arrangement as a result of which his wholesale
quota was substantially less than it would have been had he not entered into
that transaction or made that arrangement in that he had in April 1983 given
notice to Mr Crossley to terminate the partnership between them and in consequence
had no entitlement to wholesale quota, whereas otherwise he would have been
entitled with his partners to the benefit of the wholesale quota allocated to
the Second Farm;
(iii) at the time of giving notice to Mr Crossley
to terminate the partnership between them Mr Stubbs intended to go into or
remain in business as a producer;
(iv) Mr Stubbs received no benefit from the
termination of his partnership with Mr Crossley which was reasonably
commensurate with him being left with no allocation of wholesale quota;
(v) it was fair and reasonable that he should be
allocated wholesale quota.
Mr Seymour
submitted that the following errors of law were apparent on the face of the
tribunal’s decision:
(i) The Tribunal, having found as a fact in
paragraph 4 that it had been orally agreed that a partnership between Mr Stubbs
and Lord Swinton would commence in October 1984, erred in holding, in paragraph
6, that the Exceptional Hardship Claim fell to be determined on the basis that
the ‘producer’ at the date of the Exceptional Hardship Claim and/or at the date
of the Decision was not Mr Stubbs alone but a partnership of Mr Stubbs and Lord
Swinton.
(ii) The Tribunal failed, notwithstanding the
facts found at paragraph 2, to consider whether the giving by Mr Stubbs of the
notice to terminate the partnership with Mr Crossley was such transaction or
arrangement as satisfied the requirements of paragraph 17(3)(a) of Schedule 2
to the UK Regulations and thus failed to hold, as it should have, that the
giving of such notice did satisfy such requirements.
(iii) The Tribunal, having made the error set out
at (i) above, failed to take into account relevant matters and/or took into
account irrelevant matters in relation to the issues of exceptional hardship in
comparison with producers in general and whether it was fair and reasonable
that the wholesale quota be allocated in particular in that it
(a) failed to recognise that the consequence of
refusal of the Exceptional Hardship Claim was that Mr Stubbs would have to
cease dairy farming, which producers in general would not have to do;
(b) relied in support of its finding as to what
was fair and reasonable upon the erroneous view that ‘the producer is a
partnership which has not yet commenced in business’.
He submitted
that Miss Smith’s advice was negligent in that, having identified the relevant
transaction or arrangement as being the notice to terminate the partnership,
she wrongly discounted this
at the time of giving the notice, ‘to go into or remain in business as a
producer’.
Was the
tribunal’s decision open to challenge?
Miss Smith was
called to give evidence for the NFU and sustained prolonged examination and
cross-examination. She had been responsible for dealing with all cases referred
to the legal division of the NFU in relation to milk quotas, running to
hundreds, and I suspect she was accurate in stating that there was no lawyer
with more experience of this complex field than herself. At times both counsel
and I were tempted to question her more as if she were an expert witness of
foreign law than a witness of fact. Miss Smith impressed me highly as a
competent and conscientious lawyer. In evidence she sought to justify her advice
that the tribunal’s decision was not vulnerable to challenge both by affirming
the reasons given in her memorandum and by advancing other grounds upon which
the decision could be supported. I was not persuaded that Miss Smith had all
these points in mind when she advised Mr Stubbs — indeed she frankly accepted
that it was not possible to recollect or reconstruct her precise thought
process at the time.
In my
judgment, if the only issue in the way of a successful challenge of the
tribunal’s decision was whether Mr Stubbs had established that, when he gave
notice terminating the Manor Farm partnership, he ‘intended to go into or
remain in business as a producer’, judicial review should have been sought.
This was not an issue on which the tribunal ruled and I consider that there was
evidence before the tribunal upon which they could have concluded that Mr
Stubbs had satisfied this requirement.
There are,
however, a number of questions that have to be considered in order to decide
whether, on judicial review, the court would, or might, have remitted Mr
Stubbs’ application for reconsideration by the tribunal. These are best
considered in the context of the requirements of para 17 of Schedule 2 to the
UK regulations.
Was Mr
Stubbs a person to whom article 4(1)(c) of Council Regulation 857/84 applied?
In some of the
transactions with which this case is concerned Mr and Mrs Stubbs were recorded
as being individually concerned as partners. In others Mr Stubbs acted in his
own name alone. I doubt if this factor of itself would have prejudiced his
claim for quota and I propose to proceed on the basis that Mr Stubbs was at all
times acting on behalf of himself and his wife.
A claim under
para 17 of Schedule 2 could be made only by ‘a person to whom article 4(1)(c)
of Council Regulation 857/84’ applied. That article applied to ‘producers
undertaking farming as their main occupation’. A producer was, by definition:
(i) a natural or legal person or group of
persons;
(ii) farming a holding; and
(iii) selling milk.
Mr Isaacs
submitted that, under the regulations, a producer qualified as such only if he
was producing milk from a holding on April 2 1984, the date when the scheme had
to be brought into operation. I am unable to accept that this requirement
implicitly qualified the definition of producer wherever that word appeared in
the regulations. For example, a purchaser of a dairy farm between April 2 1984
and the operative date would, in my judgment, have been entitled to claim the quota
relating to that holding pursuant to para 1 of Schedule 2 and to be registered
as a producer pursuant to para 14 of that schedule. In the context of article
4(1)(c), however, I accept Mr Isaacs’ submission that the producer had to be
producing milk from a holding on April 2 1984. Regulation (EEC) No 857/84 dealt
with determining reference quantities for producers with effect from that date.
Article 4(1)(c) dealt with the grant of ‘additional’ reference quantities to
producers ‘in connection with the application’ of the formulas for determining
the primary reference quantities. It seems relatively clear that such a grant
could be made only to producers entitled to primary quotas as at April 2.
Support for this conclusion is afforded by para 17 of Schedule 2 to the UK
regulations in that para 17(3)(a)(i) speaks of a claimant whose wholesale quota
is ‘substantially less’ than it would have been and para 17(5) provides for the
grant of ‘gross additional wholesale quota’.
If this
conclusion is correct, Mr Stubbs was entitled to make a claim under para 17
only if he was producing milk from a holding on April 2 1984. At that date he
was not himself a producer. He and his wife were members of a partnership
together with Mr Crossley, which partnership was the producer. It is not
possible to apportion all, or any part, of the production to Mr and Mrs Stubbs
alone. It follows that Mr Stubbs was not in a position to make a claim under
para 17.
Was the
termination notice a transaction or arrangement that satisfied para 17(3)(a)?
The fact that
Mr and Mrs Stubbs belonged to a partnership which produced milk at Manor Farm
places additional difficulties in the way of a claim under para 17:
(1) If one treats as the relevant transaction or
arrangement the notice to terminate the partnership given by Mr and Mrs Stubbs,
it is not possible to demonstrate that this had the effect that their wholesale
quota was substantially less than if they had not entered into the transaction
or made the arrangement. Had they not given the notice they would have had no
wholesale quota — they would have remained members of the partnership which
would have obtained a quota. The effect of the notice was that they left the
partnership and the partner who remained in occupation of the holding obtained
the quota. This does not, in my judgment, fall with para 17(3)(a)(i).
(2) I do not see how it can be said that the
reasonably expected outcome of the notice to terminate the partnership was ‘a
level of wholesale delivery of dairy produce in respect of which . . .
wholesale quota is not otherwise capable . . . of being allocated to’ Mr and
Mrs Stubbs. That result depended, it seems to me, not upon the negative act of
terminating the partnership but on the positive actions of:
(i) purchasing some of the cattle from the
partnership on termination of the partnership; and
(ii) arranging for those cattle to be moved to a
farm which had no quota.
I can
summarise my conclusions thus far as follows:
(1) Mr Stubbs was not entitled to invoke article
4(1)(c) because he was not a producer as at April 2 1984 entitled to a primary
wholesale quota;
(2) the notice to terminate the partnership was
not a transaction or arrangement that had either of the consequences provided
for by para 17(3)(a) of Schedule 2.
These conclusions,
reached after three days of evidence and argument, do not reflect the reasons
given by the tribunal, which did not expressly consider the notice of
termination as a possible arrangement or transaction within para 17. I do not
find this surprising. The tribunal were given an unenviable task of attempting
to analyse the confused claim advanced by Mr Stubbs in the light of the complex
regulations. They started quite logically by considering the identity of the
producer on behalf of whom the quota was sought. They correctly identified that
producer as the producer of milk at Broadmires Farm. They then went on to
conclude that this producer was not Mr Stubbs alone but Mr Stubbs and Lord
Swinton as partners. Mr Seymour has criticised this conclusion, but I do not
consider that criticism justified. As I understand the position, Mr Stubbs’
application to the tribunal was advanced on the basis that he had moved to
Broadmires Farm pursuant to the proposed partnership with Lord Swinton. It was
not suggested that he enjoyed sole occupation under the grazing licence. Even
had this been suggested, it would have constituted no more than a temporary
arrangement and the tribunal were plainly correct when considering the overall
merits of the application to do so on the basis that the proposed long-term
relationship was that of a partnership.
The tribunal
then went on to consider whether Mr Stubbs and Lord Swinton, either as partners
or individuals, had entered into any transaction or arrangement in relation to
milk production on the Broadmires Farm holding prior to April 2 1984 that fell
within para 17(3)(a). They concluded that they had not — a conclusion which Mr
Seymour did not seek to challenge.
Excessive
hardship
Mr Seymour
submitted that the conclusion that Mr Stubbs had not suffered excessive
hardship when compared with producers in general was one which no reasonable
tribunal could have reached. Strictly, on the findings made by the tribunal,
the question of excessive hardship did not arise. Excessive hardship had to
result from deprivation of quota or production not covered by quota
attributable to a transaction or arrangement within para 17(3)(a). The
tribunal, rightly in my judgment, found that no such transaction or arrangement
had been made by Mr Stubbs.
There is no
doubt that Mr Stubbs has suffered great hardship as a
analysis. Mr Stubbs has not, in his own right, enjoyed a secure occupancy of
farmland in recent times. He has relied upon concluding partnerships with
landowners in order to earn his living from dairy farming. The scheme of milk
quotas is territorial. The quota attaches to and enhances the value of the
land, to the benefit of the landowner. Once quotas were introduced, Mr Stubbs
would have been exposed in any event to the risk of prejudice. Had he not
himself given notice terminating the partnership he would have been at risk of
termination by Mr Crossley on 12 months’ notice. Such termination would have
left him unable to continue to earn his living by dairy farming unless he could
find some other landowner with quota prepared to enter into partnership with
him. Mr Stubbs has suffered prejudice not because he has been deprived of quota
but because he chose to leave a partnership that occupied land that had a
history of use for dairy farming and was thus entitled to quota. The
regulations do not cater for hardship arising in these circumstances. The
finding of the tribunal in relation to excessive hardship was, in my judgment,
correct.
Fair and
reasonable
In dealing
with what was fair and reasonable the tribunal made a short summary of the
relevant facts. That summary was an accurate one and included the hardship
urged on the part of Mr Stubbs. The tribunal held that it was not fair and
reasonable that wholesale quota should be allocated in those circumstances.
Again Mr Seymour submitted that no reasonable tribunal could have reached this
conclusion. I do not agree.
In considering
what was fair and reasonable the following considerations were material:
1. The overall
quota for distribution between all producers was limited.
2. Quotas were
based upon historic production of milk on land holdings.
3. The milk
produced by Mr Stubbs’ cows when farmed by the Manor Farm partnership had
procured quota for the Manor Farm holding.
4. If an
additional quota were to be granted to cover the milk produced by the self-same
cows on Broadmires Farm they would, in effect, have been responsible for the
procurement of double quota.
5. The benefit
of such a quota would attach to and enhance the value of Broadmires Farm. The
principal beneficiary of this would be Lord Swinton, who had suffered no
special hardship of any kind as a consequence of the introduction of quotas.
6. Mr Stubbs
would benefit from the grant of quota to Broadmires Farm only so long as he was
permitted to farm there. At the time of the application he had no vested right
to do so (other than a short-term grazing licence of which the tribunal was
unaware) and the proposed partnership arrangement was to be subject to
termination on 12 months’ notice.
Most of those
considerations were reflected in the tribunal’s reasoning and I do not consider
their conclusion on what was fair and reasonable to be open to attack.
Had Mr Stubbs
sought and obtained leave to seek judicial review of the tribunal’s decision
the court might have found it as hard to get to grips with the complex
regulations that are applicable as I have done. But, for the reasons I have
given, I consider that the challenge of the tribunal’s decision would have been
unsuccessful. The conclusion reached and the advice given by Miss Smith were
correct, albeit that I have not been able to concur with every step of her
reasoning. She was not negligent.
No one who has
heard this story, particularly from his own lips, can fail to sympathise with
Mr Stubbs and with his feeling that he has been hard done by. He has, however,
suffered as a consequence of the application of regulations passed to give
effect to community obligations and not as a result of a failure properly to
apply those regulations.
