Milk quotas — Reference of disputed construction to the Court of Justice of the European Communities — Issue was as to whether in calculating the applicants’ direct sales quota sales of milk which were not derived from their own cows but were bought in from other producers could properly be taken into account — The Dairy Produce Quota Tribunal for England and Wales, upholding the views of the Minister of Agriculture, Fisheries and Food, decided that sales of milk which was bought in should not be taken into account in the calculation of the applicants’ quota — Applicants sought in the present proceedings to have the tribunal’s decision quashed — Applicants also complained that the reasons given by the tribunal were inadequate, but McCullough J, although accepting this criticism, held that it would be pointless to quash the decision on this ground alone and require the tribunal to reconsider the matter if the substantive issue could only be decided against the applicants — After considering the Dairy Produce Quota Regulations 1984 and EEC Council Regulations, in particular article 5c(2) of Council Regulation 804/68 and article 6(1) of Council Regulation 857/84, McCullough J came to the conclusion that milk produced otherwise than on the applicants’ own holding should not be taken into account in determining quota — It was clear that if the applicants had been dealing only with milk which had been bought in it would not have been taken into account and in any case milk bought in should have been taken into account in the determination of someone else’s quota — However, in view of the importance and complexity of the matter, and a possible ambiguity in article 6(1) of Council Regulation 857/84, it was desirable to obtain a ruling from the European Court before giving a decision — The judge suggested certain questions for counsel to consider before the order was made in accordance with RSC Ord 114 for reference of the matter to the European Court — Case then to be adjourned pending a reply from that court
The following
cases are referred to in this report.
Bulmer
(HP) Ltd & Anv. v Bollinger SA [1974] Ch
401; [1974] 3 WLR 202; [1974] 2 All ER 1226, CA
CILFIT
SrL and Lanificio di Gavarda SpA v Minister of
Health of Italy (Case 283/81) [1982] ECR 3415; [1983] 1 CMLR 472, European
Ct
This was an
application by Hall & Sons (Dairy Farmers) Ltd to quash a decision of the
Dairy Produce Quota Tribunal for England and Wales refusing to alter the
estimated primary direct sales quota notified to the applicants by the Ministry
of Agriculture, Fisheries and Food.
S Isaacs
(instructed by Summers & Co, of Beaconsfield, Bucks) appeared on behalf of
the applicants; G Pulman (instructed by the Solicitor, Ministry of Agriculture,
Fisheries and Food) appeared on behalf of the respondent tribunal.
Giving
judgment, McCULLOUGH J said: The appellant company, which I shall call ‘Halls’,
seek an order to quash a decision of the Dairy Produce Quota Tribunal for
England and Wales dated August 29 1985 that it was unable to alter the estimate
of Halls’ primary direct sales quota of which the Ministry of Agriculture,
Fisheries and Food had notified Halls by letter dated January 21 1985.
Halls supply
milk and products made from milk both to wholesale and retail customers. Some
of this milk comes from their own cows, the rest they buy. Halls contend that
to calculate their dairy produce quota all of their sales of milk and milk
products should be taken into account. The minister contends that the sales which
result from milk which Halls buy in are irrelevant and that only the sales
which result from milk produced by their own cows are to be taken into account.
The tribunal agreed with the minister. On this issue the outcome of this
application depends.
In their
notice of motion Halls make the subsidiary complaint that the tribunal failed
to give adequate and intelligible reasons for its decision and thereby broke
rule 11 of the rules of procedure of the Quota Tribunal, August 1984, which
requires the tribunal to record the decision and the reasons for its decision.
What the tribunal recorded was:
Decision. The
Tribunal directs that it is unable to vary the award of Primary Quota (1323193
litres) notified on 21st January 1985. Reasons. Whilst the Tribunal received
and accepted the carefully prepared submission from the Appellant it concluded
that the points adduced were not such as could properly be taken into account
when assessing this objection. So far as the Tribunal could ascertain the
assessment of Primary Quota did take into account the Direct Sales of the
business from its own cows.
Read in the
context of the application the effect of this was that the tribunal rejected
Halls’ submission on the issue to which I have referred and Halls must have so
understood it. However, despite the inclusion of the heading ‘Reasons’, no
indication of the tribunal’s reasoning was given. I therefore accept that there
was a breach of rule 11. But if this was the full extent of the tribunal’s
failure, it cannot avail Halls. To quash the decision on this ground alone and
thus to require the tribunal to reconsider the matter would be pointless if the
issue in question could only properly be determined in favour of the minister.
To require the tribunal to give its reasons before this court considered the
matter further would be equally futile.
The allocation
of direct sales quota is governed by regulation 4 of Schedule 1 to the Dairy
Produce Quota Regulations 1984 (SI 1984 no 1047). Regulation 4 reads:
Direct sales
quota shall be established for any producer in accordance with these
regulations and the Community legislation, and Schedule 1 shall apply in
respect of the allocation, transfer and surrender of direct sales quota and
matters consequential or incidental thereto.
In Schedule 1
para 3 is material and this reads:
For the
purpose of calculating primary direct sales quota under this Schedule the dairy
produce sold by direct sale from a holding in a base period shall be deemed to
be the dairy produce sold by direct sale during that base period (whether from
that holding or elsewhere) by the producer occupying that holding on 2nd April
1984 but not dairy produce sold by direct sale by any other producer.
There is no
need to say any more about the word ‘primary’ than that primary direct sales
quota is the type of direct sales quota with which we are concerned here.
Three things
are immediately clear: (i) that direct sales quota is to be established for a
producer; (ii) that it is to be established not only in accordance with SI 1984
no 1047 but in accordance with the Community legislation; (iii) that the
calculation of his primary direct sales quota is to be by reference to the
dairy produce sold by direct sale from a holding in a base period.
Where, as
here, there has been no change in the occupation of a holding, these provisions
additionally say no more than that for the purpose of calculating a producer’s
primary direct sales quota the dairy produce sold by direct sale from his
holding in a base period shall be deemed to be the dairy produce which he has
sold by direct sale during that base period (whether sold from that holding or
elsewhere). I have inserted the word ‘sold’ in the phrase in brackets because
this must necessarily be implied.
Where, as
here, no produce was being sold from any place other than the holding, what
this boils down to is that X is deemed to be X. One is no further forward in
discovering what X is, ie what is meant by the dairy produce sold by a producer
by direct sale.
A number of
the words used in regulation 4 para 3 of Schedule 1 are defined in regulation
2. Each of those material to the present case leads one, directly or
indirectly, to the relevant EEC Regulations.
‘Producer’ and
‘holding’ have the meanings assigned to them by article 12 of Council
Regulation 857/84.
‘Direct sale’
means a sale referred to in article 12(h) of that regulation.
‘Direct
seller’ has a corresponding meaning.
‘Direct sales
quota’ means ‘the quantity of dairy produce which may be sold by direct sale
from a holding in a quota year without the direct seller in occupation of that
holding being liable to pay levy’; and
‘Levy’ means
‘the levy payable under the Community legislation to the competent authority
referred to therein, described in article 1 of the Council Regulation 857/84
(which deals with the fixing of the levy)’.
Regulation
857/84 refers back to Regulation 856/84, which in turn amends Regulation
804/68. Before looking at the individual definitions it is pertinent to see, if
only in the broadest outline, what is the scheme of the legislation in so far
as it affects milk and milk products, ie milk, cream, butter and cheese.
Regulation
804/68 established, as part of the Common Agricultural Policy, the common
organisation of the market in milk and milk products.
The preamble
to Regulation 856/84 recited, inter alia:
(1) that the market in milk products in the Community
was suffering from structural surpluses as the result of an imbalance between
supply and demand;
(2) that quantities of milk delivered were
increasing at a rate such that the disposal of surpluses was imposing financial
burdens and market difficulties which were jeopardising the very future of the
common agricultural policy;
(3) that the most effective method and the one
having the least drastic effect on the income of producers was the introduction
of an additional levy on quantities of milk delivered beyond a guaranteed
threshold; and
(4) that the purpose of the levy, which was
provided for by the Regulation, was to regulate and stabilise the market in
milk and milk products.
The new
article 5c of Regulation 804/68 (which was introduced by article 1 of
Regulation 856/84) said, so far as material:
1. . . . 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 . . . The levy system shall be implemented . . . in accordance
with one of the following formulas
Formulas A and
B were then set out.
2. The levy
shall also be payable by every milk producer on the quantities of milk and/or
milk equivalent he has sold for direct consumption and which . . . exceed a
reference quantity to be determined.
In the United
Kingdom legislation this reference quantity is called a ‘quota’.
Article 1 of
Regulation 857/84 fixed the levy. Article 6 so far as material read:
1. Each
producer of milk and milk products referred to in Article 5c(2) of Regulation
(EEC) No 804/68 shall be assigned a reference quantity corresponding to the
direct sales made by the producer . . .
In article 12
come the definitions. I take first that of ‘producer’. It is as producer and only
as producer that Halls are entitled to a quota or reference quantity, and as
producer that they are liable to pay the levy if their direct sales exceed it.
(See article 5c(2) of Regulation 804/68, article 6(1) of Regulation 857/84 and
regulation 4 of SI 1984 no 1047.)
‘Producer’
means ‘A . . . person . . . farming a holding . . . selling milk or other milk
products directly to the consumer and/or supplying the purchaser’ (article
12(c)).
‘Holding’
means ‘all the production units operated by the producer . . .’ (article
12(d)).
‘Milk or milk
equivalent sold directly to consumption’ means ‘milk or milk products processed
into milk equivalent, sold without
Halls are, in
my judgment, correct in saying that: (1) all the milk and milk products which
they sell are sold without going through an undertaking, treating or processing
milk, ie they are all sold directly to consumption; in other words all their
sales are direct sales (to use the United Kingdom expression). (2) they operate
a production unit and farm a ‘holding’. (3) they are, therefore, a ‘producer’.
None of this
can be gainsaid. The question is whether such direct sales as derive from milk
produced other than on their own holding are to be taken into account in the
calculation of their reference quantity or quota. There is nothing express in
Regulation 856/84 to say whether it should or not. Article 5c(2) merely says
that every milk producer’s reference quantity is ‘to be determined’ and,
subject to the requirement that the sum of the reference quantities shall not
exceed the maximum figures specified in article 5c(3), Regulation 856/84 leaves
the determination of reference quantities to each member state, it being
implicit that in making them regard will be had to the objectives of the
Community legislation.
A
consideration of the objects of the Community legislation and in particular the
passages from the recitals to Regulation 856/84, to which I have referred,
together with the second sentence of article 5c(1) (‘The objective of the said
levy shall be to curb the increase in milk production . . .’), point to the
conclusion that the sales derived from milk produced other than on the
producer’s own holding should not be taken into account in determining the
reference quantity referred to in article 5c(2).
However, the
terms of article 6 of Regulation 857/84 are or may be to the opposite effect.
‘Each producer of milk and milk products referred to in article 5c(2)’ — and
Halls are one — ‘shall be assigned a reference quantity corresponding to the
direct sales made by the producer.’ No
limitation is placed on the direct sales which are to be taken into account. Is
one to be implied? Having regard to the
objects of the legislation I would say that it was.
In reality
Halls are doing two things: (1) they are farming a holding and selling its
products directly to consumers. (2) they are buying in milk and selling its
products directly to consumers. I omit reference to any other types of sale.
The former activity is within article 5c(2), entitles them to a quota and
renders them liable, if the quota is exceeded, to pay the levy. That latter
activity is, in my belief, outside it. Had Halls been conducting only the
second activity, they would clearly not be within article 5c(2). I can see no
reason why, merely because they are in addition conducting the first activity,
the second should also come within article 5c(2). The same, in my opinion, is
true of para 3 of Schedule 1 to SI 1984 no 1047.
The minister
asserts, and it is not disputed, that the milk which Halls buy in is taken into
account in the determination of someone else’s quota. If Halls’ argument were
correct the same milk would be taken into account twice. This would hinder the
working of the scheme and would make for unfairness between one quota holder
and another.
Were Halls
right and were they, in consequence, to be allocated a primary direct sales
quota of, say, 10m litres on the basis that about 1m litres of sales came from
their own milk and about 9m litres from milk bought in, there would be nothing
to stop them from doubling their herd, producing 2m litres themselves and, if
need be, reducing the amount bought in to 8m litres. It would not prevent the
1m litres which Halls would no longer be buying from being produced. More, not
less milk, overall would be produced as a result, yet the objective of the levy
is ‘to curb the increase in milk production’.
It is not
without significance that no other applicant for direct sales quota has
contended for the construction advanced by Halls. According to the affidavit of
Mr C F Hall, their managing director, there are about 190 of them who both
produce milk and buy it in.
As I
understand him, Mr Isaacs, counsel for Halls, accepts that these anomalous
results would ensue if his argument were correct. His submission is that the
wording of the relevant United Kingdom provisions, interpreted as they must be
in the light of the relevant EEC Regulations, compels acceptance of the
construction for which he contends. I am only able to accept his argument to
the extent that Article 6(1) of Regulation 857/84 raises an ambiguity. But in
my opinion, for the reasons I have given, it is implicit that the sales in
question are not to be taken into account. Left to myself I would so decide.
The final
question is whether, before reaching a decision on this application, I should,
in accordance with article 177 of the EEC Treaty, request the European Court of
Justice to give a ruling. In this connection I have been referred to both Bulmer
(HP) Ltd v Bollinger SA [1974] Ch 401 and CILFIT SrL and
Lanificio di Gavarda SpA v Minister of Health of Italy (Case 283/81)
[1982] ECR 3415.
The
interpretation of article 6(1) of Regulation 857/84 is necessary to enable me
to give judgment. I believe that this, rather than any definition in article
12, is the central provision. If a limit is to be implied on article 6(1) of
regulation 857/84, it may be that a corresponding one is to be implied in
article 5c(2) itself, for clearly if the sales in question are to be ignored in
the determination of the reference quantity, they must likewise be irrelevant
to the levy. Be that as it may, to give judgment a decision on a matter falling
within article 177 is necessary. Should I decide it myself or ask for a ruling?
There is, so
far as I have been told, no previous decision on the point. The applicants want
me to refer it; the minister does not. He says that the answer is so clear it
would be pointless to refer and one should not overload the court. However, if
I do, the matter will be decided once and for all. If I do not, Halls may
appeal to the Court of Appeal, who may or may not refer. That way there would
be the possibility of an extra hearing and extra expense.
The point, as
the minister concedes, is one of importance. Mr Isaacs says that only if the
matter is clear beyond reasonable doubt should I not refer (see CILFIT p
3430) and he invites my particular attention to paras 16 to 20 on that page. I
do not see this as a question which could turn on the comparison of different
language versions; nor do I see it as one dependent on terminology peculiar to
Community law. No understanding of any legal concept is involved. The question
is a pure one of construction in the light of the objectives of the legislation
in question. I believe that I have been able to identify the material
objectives from the passages to which I have been referred. I cannot think that
this is a topic on which the law may evolve. The right answer, whatever it be,
will always have been the right answer and will, as far as anyone can see, so
remain.
However, there
remains this. The provision or provisions in question have to be interpreted in
the light of the provisions relating to the Common Agricultural Policy as a
whole. The levy provisions in relation to milk and milk products are complex. I
have not, for example, been able to see how the determination of reference
quantities for producers under formula A or the determination of reference
quantities for purchasers under formula B are intended to work or how they and
the provisions of article 5c(2) interact. There may well be something in these
other provisions which bears on the point in question. Understandably,
counsel’s submissions have not been able to take account of any feature of
possible relevance in the working of the levy system in other member states. I
can see consequences which, if Halls’ argument is correct, would run counter to
the objects of the scheme, but others may see consequences which, if the
minister’s argument is correct, would be similarly undesirable. My view,
clearly held on the material and arguments placed before me though it is, may
be wrong. Whether judged by the criteria of Bulmer v Bollinger or
by those of CILFIT, I think it is better for a ruling to be requested
rather than to decide straight away.
I will not
decide what question or questions to ask. I will hear counsel first, but for
what it is worth I suggest something along the following lines: (1) Is the
reference quantity referred to in article 6 of Regulation 857/84 to be
calculated from all of the direct sales made by the producer in the relevant
period? (2) Is it only to be calculated
from such of his direct sales as derive from the milk produced by the farming
of his own holding? (3) In making the
calculation are direct sales which derive from milk which he has bought in to
be ignored?
In one sense
that is to ask the same question three times, but there might be advantages in
dividing it into three in that way.
Case referred
under RSC Ord 114 to the Court of Justice of the European Communities for the
rulings of the court on questions to be settled by counsel and approved by the
judge. Case adjourned pending the result of the reference to the court.
