Farm – Agricultural tenancy – Subsidies – Respondents contracting with appellants for sale of freehold farm – Dispute arising in respect of passing of farm subsidies – Appellants claiming damages for breach of contract – Recorder construing contract in favour of respondents – Whether appellants establishing reasonable request for transfer of subsidies – Appeal dismissed
In 2004, the first and second respondents entered into a contract with the appellants for the sale of a freehold farm with an estimated total area of 215 acres, at a price of £1.53 million. The farm was subject to an agricultural tenancy in favour of the third respondent, a company owned and controlled by the first and second respondents. The sale was with vacant possession and the respondents agreed to procure the surrender of the company’s tenancy. The respondents continued to own and farm other property and retained some land that had been included in the same Land Registry title as the property that had been sold.
A dispute arose between the parties concerning the transfer of the benefit of certain EU farm subsidies from the respondents to the appellants, who already lived and farmed at a nearby property. The contract for sale included a clause that the respondents would use all reasonable endeavours to take all action reasonably requested by the appellants to ensure that the benefit of all subsidy payments for 2005, and subsequent years, passed to the appellants. The appellants alleged that the respondents were in breach of that clause because the benefit of the historic element of the payments had not been transferred to them.
In the county court, the recorder made a finding that the obligation under the contract did not include the historic element of the payments and dismissed the appellants’ claim for damages without considering whether the respondents were in breach of the relevant clause. The respondents argued that, in any event, the contract did not stipulate that the property was sold with any entitlement to the subsidies, but merely required the respondents to take all reasonable steps to transfer the benefit of the payments at the appellants’ reasonable request. The appellants appealed.
Held: The appeal was dismissed.
On the proper construction of the contract, the relevant clause created an enforceable obligation in respect of the transfer of the benefit of the historic element of the subsidy payments for 2005 and subsequent harvest years. Accordingly, the recorder had been wrong in his conclusion on that issue.
In default of an effective transfer of the entitlement to the relevant payments, the contract imposed an obligation on the respondents in effect to account to the appellants for the payments received by them, if reasonably requested to do so by the appellants. Although the appellants had made suggestions to that effect during legal argument on this appeal, they had never alleged in their pleaded case that they had made a reasonable request for such action or that the respondents had failed to use all reasonable endeavours to respond to such a request. It was not put forward at trial nor on the evidence was that action requested. Without either a finding by the recorder or evidence to support it, it was impossible to conclude that the respondents had refused a request to act in accordance with the contract.
It followed that, although the recorder was wrong in his construction of the relevant clause, because no reasonable request to take action had been established, no claim had arisen for breach of contract.
Obiter: An issue might arise whether in the particular circumstances the request, if made, would have been reasonable. Although it was not necessary to decide the point, it was doubtful whether such a request would have been within the contemplation of the relevant clause, which was a provision to take, at the appellants’ expense, action reasonably requested by the appellants. If it had been intended to impose a payment obligation, it was likely to have done so in clear terms.
James Leckie (instructed by Holmes & Hills, of Essex) appeared for the appellants; Bruce Monnington (instructed by Roythorne & Co, of Spalding) appeared for the respondents.
Eileen O’Grady, barrister
