Milk (Community Outgoers Scheme) (England and Wales) Regulations 1986 — Appeal by tenant from arbitrator’s award under regulations — Tenant had applied for compensation for undertaking to discontinue milk production and had sought the consent of the respondent landlords to his doing so and surrendering his entire quota — Tenant had covenanted in his tenancy agreement ‘not to dispose of the whole or any part of any basic quota under a marketing scheme allotted to the holding’ — Respondent landlords withheld consent, relying on regulation 9(1)(a) and (1)(b)(ii) of the above regulations — The arbitrator upheld the landlords’ refusal of consent as not unreasonable under regulation 9(1)(b)(ii), on the ground of the covenant by the tenant not to dispose of quota — The point was not taken before the arbitrator that the covenant did not apply to milk quota — On appeal to the tribunal the tenant submitted that the milk quota which was the subject of the present regulations and which implemented part of the common agricultural policy of the European Economic Community was not ‘basic quota under a marketing scheme’ pursuant to the UK Agricultural Marketing Acts — The tribunal accepted this submission, holding that the provisions giving effect to the EEC Council and Commission regulations did not establish a marketing scheme, but imposed a levy on disposal of milk products with a view to curbing the growth of milk production — The tribunal rejected an objection that the point had not been taken before the arbitrator — Appeal allowed and matter remitted to the arbitrator to reconsider on the basis of the tribunal’s decision
The following
cases are referred to in this report.
Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158; [1969] 2 WLR 673;
[1969] 2 All ER 119, CA
Smith v Charles Baker & Sons [1891] AC 325
This was an
appeal by the tenant, Jeffrey John Lee, of Redwalls Farm, Oswaldtwistle,
Accrington, Lancashire, from the award of the arbitrator, Edmund Christopher
Parker MA FRICS FCIArb, on a reference under regulation 17 of the Milk
(Community Outgoers Scheme) (England and Wales) Regulations 1986, rejecting the
tenant’s claim for compensation for discontinuance of milk production. The
respondents to the appeal were the landlords, John and Joyce Heaton.
Rupert
Anderson (instructed by Ellis & Fairbairn) appeared on behalf of the
appellant; John Pallister FRICS CAAV represented the respondents.
Giving the
decision of the tribunal, LORD GRANTCHESTER said: This is an appeal by Mr
Jeffrey John Lee, who is the tenant and occupier of Redwalls Farm,
Oswaldtwistle, Accrington in Lancashire. The respondents are Mr and Mrs John
Heaton of 2 Lane Ends, Osbalderton, Blackburn in Lancashire, who jointly own
Redwalls Farm aforesaid subject to and with the benefit of such tenancy. This
appeal has been brought under regulation 17 of The Milk (Community Outgoers
Scheme) (England and Wales) Regulations 1986 (SI 1986 no 1611) (‘the Community
Outgoers Regulations’) against an award of Mr Edmund Christopher Parker as
arbitrator on a reference to arbitration under those regulations.
By an
agreement of tenancy dated May 24 1974 made between the respondents (therein
called ‘The Landlord’) of the one part and the appellant (therein called ‘The
Tenant’) of the other part the respondents agreed to let, and the tenant agreed
to take, as tenant from year to year the holding, cottages and land known as
Redwalls Farm (therein called ‘The Holding’) from May 2 1974 as to the land and
May 12 1974 as to farmhouse and buildings until determined by either the
landlord or the tenant on February 2 in any year by 12 months’ notice in
writing at the yearly rent therein specified (or any rent substituted
therefor). By clause 2 of such agreement the tenant agreed with the landlord (inter
alia):
(t)(i) Not without the Landlord’s consent in
writing to permit or suffer any basic quota under a marketing scheme to lapse
or be reduced through any failure to produce on the Holding a sufficient
quantity of any produce now or hereafter the subject of a marketing scheme
which is or has been produced on the Holding or which is normally grown in the
district.
(ii) Not to dispose of the whole or any part of
any basic quota under a marketing scheme allotted to the holding or to the
Tenant in respect of the Holding.
(iii) On the Termination of the Tenancy to nominate
the Landlord or the incoming Tenant as his successor in respect of any basic
quota under a marketing scheme in respect of which the Tenant has the right of
nomination.
The appellant
remains in the occupation of Redwalls Farm (‘the holding’) under such agreement
of tenancy. The holding consists of 51.68 acres which, in 1974, contained the
farmhouse and buildings and grassland.
The Dairy
Produce Quotas Regulations 1984 (SI 1984 no 1047) came into operation on July
24 1984. They implemented Council and Commission Regulations of the European
Economic Community under which (inter alia) a levy is charged on dairy
produce (expressed in kilograms of milk) sold by direct sale by a producer or
delivered by a producer to a dairy business unless the sales or deliveries are
within a reference quantity or quota. Such 1984 regulations laid down the
criteria and procedure for allocations of quota to producers. They were
subsequently amended but have been consolidated with amendments as the Dairy Produce
Quotas Regulations 1986 (SI 1986 no 470).
The appellant
is a producer for the purposes of the said 1984 regulations and the subsequent
regulations amending and consolidating the same as aforesaid. In accordance
therewith he was initially provisionally allocated a primary wholesale quota of
(so I am informed) 124,245 litres, which has subsequently been increased
thereunder to a wholesale quota of (so I am informed) 137,965 litres. Those
figures do not appear in the documents now before me.
On October 21
1986 the appellant applied under the Community Outgoers Regulations claiming
compensation for an undertaking to discontinue milk production on the holding
and on the same day he applied for the consent of the respondents to his giving
up milk production and surrendering his entire quota under the 1986
Regulations. Regulation 7 of the Community Outgoers Regulations provides that
an application thereunder ceases to be valid unless the person having the
landlord’s interest in the relevant holding has consented or has unreasonably
refused his consent thereto. Regulation 8 states that a landlord shall have
unreasonably refused his consent if he has not, within the time therein
specified, served a notice objecting to the application on one or more of the
grounds specified in regulation 9 on (inter alia) the tenant. Regulation
9 reads as follows:
9(1) Subject to paragraph (2), the grounds upon
which a landlord may object to a tenant’s application in relation to a holding,
or part of a holding, for the purposes of regulation 7 or regulation 8 are —
(a) that it appears to him that the payment
which he would receive on arbitration in accordance with these regulations if
that application was successful or the amount which the tenant is prepared to
pay (if that amount is greater) would be less than the capital value of the
loss of rent which an arbitrator would determine that he would suffer as a
result of the surrender of the relevant quota;
(b) that the tenant, or any landlord, is bound
by a covenant (however expressed) entered into with any person holding a
superior interest in the relevant land, or with the predecessor of that person,
to the effect either that —
(i) the holding or any part
thereof will be farmed as a dairy farm, or
(ii) any quota on that
holding or part of that holding will be maintained; and
(c) that the landlord is a smallholdings
authority for the purposes of section 38 of the Agriculture Act 1970
(smallholdings authorities) which holds the holding, or any part thereof, for
the purposes of smallholdings in accordance with Part III of that Act and which
intends, at the end of the current tenancy, to re-let, for the purposes of
smallholdings, the holding, or any part thereof, or part of any part of that
holding to be farmed as a dairy farm.
(2) A landlord may not object to a tenant’s
application on the ground specified in paragraph (1)(b)(ii) if the covenant
concerned relates solely to commodities other than milk.
In the present
case it is not disputed that, by a notice dated October 27 1986, the
respondents served a notice on the appellant withholding their consent to the
said application by the appellant specifying that they withheld their consent
on the grounds set out in regulation 9(1)(a) and (1)(b)(ii). The question
whether the respondents’ objection should be upheld was then referred under
regulation 10 to the determination of the arbitrator who, on December 30 1986,
made and published his award as follows:
(1) I AWARD AND DETERMINE that the landlord’s
refusal to support the tenant’s application to join the Milk (Community
Outgoers Scheme) 1986 and 1987 dated the 21st day of October 1986 was not
unreasonable in accordance with regulation 9(1)(b)(ii) of Statutory Instrument
1986 No 1611.
(2) I AWARD AND DIRECT that Mr J J Lee shall bear
his own costs of and incidental to this Award together with my costs.
(3) I AWARD AND DIRECT that Mr J J Lee shall
contribute the sum of £75 towards the landlord’s costs of and incidental to
this Award.
(4) I AWARD AND DIRECT that any costs payable by
one party to the other party under or by virtue of this award shall be so paid
on the twenty-eighth day after delivery of this award.
In his reasons
the arbitrator stated (inter alia):
The matter
rests on the interpretation of a landlord’s unreasonableness in refusing to
support a tenant’s application to join the Milk (Community Outgoers Scheme)
1986 and 1987.
The holding is
let on a written agreement duly stamped and dated May 24 1974. In this
agreement the tenant covenants under clause 2(t)(ii) on page 4 Not to dispose
of the whole or any part of any basic quota under a marketing scheme allotted
to the holding or to the Tenant in respect of the holding Mr Pallister for the
Landlord pleaded that this covenant fulfilled the criteria for objection set
out in regulation 9(1)(b)(ii) of the SI and was not barred by regulation 9(2).
Mr Mackay for the tenant agreed that this was so.
Mr Mackay
argued that a landlord must be reasonable in refusing his consent and that
‘reasonableness’ was a wider concept than inferred by regulation 9: if reg
9(1)(b) was to be as ‘baldly stated’, then there would be no reason to enact
reg 10. There is no reference to reg 9(1)(b) in reg 10.
The SI
requires that the landlord should not be unreasonable and then defines
unreasonableness which includes those valid grounds for objection which are NOT
upheld by an arbitrator. It does not require the landlord to be reasonable; but
only to comply with limited grounds for objection. Regulation 10 does not
qualify regulation 9(1)(b) so that it stands as good grounds for withholding
consent on a bald statement of facts.
I accordingly
had no hesitation in ruling that the tenant’s covenant not to part with any
quota is good in the context of SI 1986 No 1611.
The appellant
has appealed to this tribunal under regulation 17 of the Community Outgoers
Regulations against such award by notice dated January 13 1987 in the following
terms:
The
arbitrator erred in law in holding that the claimant was bound by a covenant
within regulation 9(1)(b) of the said Regulations and, in particular, the
arbitrator erred in law in holding that the clause 2(t) of the tenancy
agreement dated May 24 1974 was such a covenant;
Mr Rupert
Anderson appears for the appellant. He submits that the appeal should be
allowed and the matter remitted to the arbitrator on the grounds that quota
allocated to a producer under the 1984 Regulations and the 1986 Regulations
does not consist of, or include, ‘basic quota under a marketing scheme’ within
the meaning attributable to these words as appearing in each of the three
paragraphs of clause 2(t) of the agreement of tenancy relating to the holdings
and subsisting between the appellant and the respondents. As a result, so he
submits, such clause 2(t) is not a covenant to the effect that ‘any quota on
that holding or part of that holding will be maintained’ for the purpose of
regulation 9(1)(b) of the Community Outgoers Regulations, in which ‘quota’
bears the same meaning as in the 1986 Regulations. Mr Anderson points out that
this argument was not advanced on behalf of the tenant in the course of the
arbitration, but contends that it is a point of law which I should consider on
this appeal, as I can correct the error without injustice to the respondents.
In this respect he relied upon Doyle v Olby (Ironmongers) Ltd
[1969] 2 QB 158, CA. In the course of such argument Mr Anderson mentioned the
Agriculture Marketing Acts as the statutory provisions under which ‘marketing
schemes’ of agricultural products are established.
Mr John
Pallister appears for the respondents. He submits that this appeal should be
dismissed with costs, to be assessed if not agreed. First, he argues that,
under the Community Outgoers Regulations and in particular regulation 8(2)
thereof, a right of appeal against a determination by an arbitrator is
conferred upon a landlord, from which it should be inferred that no such right
is conferred upon a tenant. Second, he contends that the question whether quota
allocated under the 1984 Regulations and the 1986 Regulations is ‘basic quota
under a marketing scheme’ is a question of fact, so that the question cannot be
raised on an appeal under regulation 17 of the Community Outgoers Regulations.
Third, he submits that quota under the 1984 regulations and 1986 regulations is
‘basic quota under a marketing scheme’ as the purpose of the Council and
Commission Regulations of the European Economic Community to which they gave
effect was to limit the quantities of milk products sold by producers to
wholesalers or by direct sale. Fourth, he argues that I should not allow the
appellant to take a point on this appeal which had not been taken on his behalf
in the course of
Halsbury LC in Smith v Charles Baker & Sons [1891] AC 325.
Having been
assisted in my deliberations by Mr L S Northen, the member of the Dairy Produce
Quota Tribunal appointed by me for such purpose, I am of opinion that Mr
Anderson is correct in his submission that the quota allocated to the appellant
under the 1984 Regulations and the 1986 Regulations is not ‘basic quota under a
marketing scheme’ for the purposes of clause 2(t) of the agreement of tenancy
in this case. To my mind, those words refer to quota under a scheme made for
regulating the marketing of agricultural products (those words appearing in the
preamble to the Agricultural Marketing Act 1931). They are not in my opinion
apposite to include wholesale quota allocated under the 1984 Regulations or the
1986 Regulations to give effect to the Council and Commission Regulations of
the European Economic Community. The latter do not establish, or seek to
establish, a scheme for regulating the marketing of milk, but impose a levy on
disposals of milk products in the Community with a view to curbing the growth
in milk production (I take those words from the preamble to Commission
Regulations no 1371/84).
Next, I take
the view that the correct construction of clause 2(t) of the agreement of tenancy
is a question of law, and that such a question may be raised on an appeal to
this tribunal under regulation 17 of the Community Outgoers Regulations
notwithstanding that it was not taken in the course of the arbitration,
provided that no injustice thereby results to the respondents. I apply the
dictum of Sachs LJ in the case of Doyle v Olby (Ironmongers) Ltd
[1969] 2 QB 158 at p 170 G.
Unless the
respondent can, at any rate, show that he has been prejudiced by the course
taken at first instance to such an extent that departure from it would be
unjust to him, there should be no bar. The books are full of instances where an
appellant has succeeded on a different point from that taken at the trial.
I do not
consider that the case of Smith v Charles Baker & Sons [1891]
AC 325 is authority to the contrary. It appears the matter first came before
the county court in Yorkshire and it was held that Part V of the County Courts
Act 1888 was or had been construed so as to limit appeals from a county court
to questions of law raised at the trial before the court. In my view, there is
no such limitation imposed by regulation 17 of the Community Outgoers
Regulations. And I am of opinion that, in this case, the respondents have not
shown that they have been so prejudiced by the course of action taken before
the arbitrator that it would be unjust to bar the appellant from taking, as a
new point on this appeal, the question of the true construction of clause 2(t)
of the agreement of tenancy.
It follows, in
my view, from the foregoing that I should now allow this appeal and declare
that neither the whole nor any part of the wholesale quota allocated to the
appellant under the 1984 Regulations and the 1986 Regulations falls within the
words ‘any basic quota under a marketing scheme’ in any of the three paragraphs
of clause 2(t) of the agreement of tenancy. In consequence, it seems to me that
I should set aside the whole of the arbitrator’s award dated December 30 1986
and, having regard to the respondents’ objection under regulation 9(1)(a) of
the Community Outgoers Regulations, remit the matter to the arbitrator for his
further determination on the basis of such declaration, including such new
direction or directions as to the costs of and incidental to the matter, as he
may think fit in the exercise of his discretion. I consider that this tribunal
has no power to award costs.
