Milk quota — Outgoer — Surrender of tenancy — Absence of compensation — ‘Lacuna’ of two years between 1984 and 1986 — No statutory scheme in the United Kingdom — Agriculture Act 1986 not retrospective — Whether United Kingdom in conflict with EEC law — Whether Ministry of Agriculture under misapprehension — Effect of Wachauf case in the Court of Justice of the European Communities — Application for leave to apply for judicial review — Leave granted
renewal of an application for leave to apply for judicial review which had been
refused by Kennedy J — The present application was made in accordance with RSC
Ord 59, r 14(3) — Although technically ex parte, the court had allowed counsel
to appear on behalf of the Minister of Agriculture, Fisheries and Food, but had
refused an application for intervention on the part of certain landowners — The
applicant, the third generation of tenant dairy farmers, had retired from
farming on March 25 1985 — He received no compensation for his work in
enhancing the value of the milk quota attached to the farm, the quota reverting
to the landlord — The Agriculture Act 1986, which provided for compensation,
had not yet been passed and when passed was not retrospective — There was then
no statutory scheme in the United Kingdom to compensate a retiring farmer in Mr
Bostock’s situation; the Outgoers Scheme was not yet operative — There thus
appeared to be a ‘lacuna’ in the period 1984-86 during which a tenant
surrendering a tenancy with milk quota attached had no right under English law
to obtain compensation under this head from his landlord
however, the Court of Justice of the European Communities gave a judgment in
the case of a German farmer, Hubert Wachauf, which disclosed, as an arguable
point, that the statutory provisions in the United Kingdom prior to the passing
of the Agriculture Act 1986 were inconsistent with European Community law — In
the present case counsel for the Minister of Agriculture conceded that, as a
result of the Wachauf judgment, there was such an arguable point, although
previously the ministry, in correspondence with the applicant’s solicitors, had
disagreed with this interpretation of the effect of the judgment
Appeal accepted that there was at least an arguable point, namely, an
inconsistency between the legal position in the United Kingdom in 1984-86 and
the European Community law as now declared by the European court — As the
European court had no power to make new law, the Wachauf judgment merely
declared the law as existing since 1984 — This meant that the rights now
claimed by the applicant had arisen some five years before the present
application — The court noted that RSC Ord 53, r 4(1) provided that an
application for judicial review had to be made promptly, and in any event
within three months from the date when the grounds for the application first
arose, unless the court considered that there was ‘good reason’ for extending
the period within which the application should be made — The question therefore
was whether there was ‘good reason’ in the present case for extending the
period
observed that the point which had been conceded to be arguable was one of
obvious importance — The misapprehension which had prevented the applicant from
exercising his rights under the law promptly was one shared with the Minister
of Agriculture himself and his advisers — There was at least a possibility that
the minister had been wrong — The result was that in the court’s opinion there
was ‘good reason’ for extending the period for applying — It was emphasised
that the court was not prejudging the merits of the substantive application —
The hearing inter partes would have to consider at length the effect of the EEC
regulations as interpreted by the European court in the Wachauf case — If it
were to be established that there was a duty all along under European law in
the United Kingdom to make provision for the compensation of outgoing tenants,
that was a matter which would call for consideration and necessary adjustment
if it could reasonably be done — Questions of good administration and prejudice
to third parties, as mentioned in section 31(6) of the Supreme Court Act 1981,
would have to be examined in depth at the inter partes hearing — The court
referred to the guidance given by Lord Goff in R v Dairy Produce Quota
Tribunal for England and Wales, ex parte Caswell — It was in the light of Lord
Goff’s speech that the court refused the application in the present case for
intervention on the part of landowners
apply for judicial review was granted
The following cases are referred to in
this report.
R v Dairy Produce Quota Tribunal for
England and Wales, ex parte Caswell [1990] 2 WLR 1320; [1990] 2 All ER 434,
HL
R v Stratford-on-Avon District Council,
ex parte Jackson [1985] 1 WLR 1319; [1985] 3 All ER 769; (1985) 84 LGR 287,
CA
Wachauf (Hubert) v Bundesamt fur Ernahrung
and Forstwirtschaft (89/C207/12)
This was an application by Dennis
Clifford Bostock, whose family had been for three generations tenant farmers of
Green Farm, Chorley, near Nantwich, for leave to apply for judicial review,
renewing an application refused by Kennedy J. The question at issue was the
applicant’s right to compensation in respect of milk quota on the termination
of his tenancy.
Michael Burton QC and Nigel Green
(instructed by Burges Salmon, of Bristol) appeared on behalf of the applicant;
Stephen Richards (instructed by the solicitor to the Ministry of Agriculture,
Fisheries and Food) represented the minister; Richard Gordon (instructed by
Dawson & Co) represented the interveners.
Giving judgment, PURCHAS LJ said:
This is an application for leave to apply for judicial review by Dennis
Clifford Bostock under RSC Ord 53, r 4(1) which, having been refused by Kennedy
J on July 26 1990, the applicant renews to this court under Ord 59, r 14(3).
Although it is technically an ex parte application, Mr Richards has been
allowed by the court to appear for the Minister of Agriculture, Fisheries and
Food (‘the minister’), exercising its inherent jurisdiction according to
well-established precedent. Mr Gordon applied to intervene on behalf of one or
more landowners. In the initial stages the court understood that they were
landowners other than the landlord particularly concerned with the facts of
this application but, during the course of the day, we were told by Mr Gordon
that he had also received instructions from the particular landlord involved.
Nevertheless, having heard argument, we did not grant his application to intervene.
The circumstances can, for the purposes
of this application, be briefly stated. The Bostock family for three
generations were tenant farmers of Green Farm, Chorley, near Nantwich, which is
part of the Cholmondeley Estates. The applicant took over the tenancy in 1962
from his father who, in turn, had taken over from his grandfather in 1925.
During the years the applicant had built up the dairy side of the farm.
In March 1984 the minister introduced a
milk quota system by means of the Dairy Produce Quotas Regulations 1984. This
was by way of implementation of regulations (which had been issued by the
Council of the European Communities), Council Regulation (EEC) no 856/84
amending Council Regulation (EEC) no 804/68; Council Regulation (EEC) no 857/84;
and a regulation of the European Communities, Commission Regulation (EEC) no
1371/84.
As a matter of record, in April 1984 the
quota granted under the scheme by the Milk Marketing Board to this particular
farm and to Mr Bostock, as the farmer, was 213,583 litres of milk. The quota
was of considerable commercial value because it controlled the production of
milk or, in other respects, dairy produce and therefore affected the value of
the farm in respect of which it was issued. Under the regulations, although the
quota was issued to the farmer, it in fact attached to the farm itself. The
amount of the quota depended upon the amount of milk or other produce marketed
in previous years and was specifically identified and capable of calculation
accordingly.
In 1984 the minister also made the Milk
Supplementary Levy (Outgoers) Scheme. In the briefest of summaries, this was
effective for a short time early in 1984 and then, we were told, was revived
again later in the latter part of 1985 for a comparatively short period. In
1984 it was of no concern to the applicant, who at that time intended to
continue farming. The scheme provided for compensation to a farmer ceasing to
farm, who was to receive compensation if he surrendered his quota, which then
became available for redistribution by the Milk Marketing Board within the
global quota permitted under the European Regulations. He could obtain such
compensation only if the landlord gave his consent. This in the normal case was
unlikely, since the landlord would lose the benefit of the quota which would
otherwise revert to him with the land when the tenant surrendered his tenancy
and would thereby enhance the reversionary value of the farm.
On March 25 1985 the applicant retired
from farming and surrendered his tenancy. He received no reward for the work
that he had done on the farm by way of enhancing the value of the quota which
it enjoyed and which duly reverted to the landlord. Indeed, anticipating the
retirement, the agents for the landlord, on February 5 1985, wrote a letter to
the Milk Marketing Board seeking to increase the quota clearly for their own
benefit on the reversion of the farm. At the time of the applicant’s retirement
the Outgoers’ Scheme was not operative. But, in any case, for the reasons which
I have already given, it is highly doubtful whether it would have been of any
benefit to the applicant, because in all probability he would not have obtained
the consent of the landlord.
It is necessary, again very briefly, to
touch upon the council regulations. In the first one, regulation 857/84, I need
refer only to articles 6 and 7, which provided:
6
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 during the 1981 calendar year,
increased by 1%.
7
Where a holding 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.
There was no specific reference in the
regulations to tenants surrendering their leases and losing the benefit of
their labours.
However, the following year, article 1(4)
of regulation 590/85, which was published on February 26 1985, provided:
In the case of rural leases due to
expire, where the lessee is not entitled to an extension of the lease on
similar terms, Member States may provide that all or part of the reference
quantity corresponding to the holding which forms the subject of the lease
shall be put at the disposal of the departing lessee if he intends to continue
milk production.
Commission regulation 1371/84, by article
5, provided for the transfer of the reference quantity in fall to the producer
taking over the holding and took the matter no further, except that it extended
to all forms of transfer. It was clear from the earlier regulation that the
quota went with the land.
In 1986 the Agriculture Act 1986 was
passed. That provided for compensation to be paid by the landlord to an
outgoing tenant in respect of the added value or part of it accruing to the
land surrendered. It is not necessary in this judgment to rehearse any of the
detailed provisions (they are to be found in the Schedule to the Act) but it
can fairly be summarised by saying that the object of the legislation was to
ensure that there was some compensation given to the outgoing tenant so as to
avoid undue enrichment of the landlord from the efforts of the tenant during
his tenancy.
By this time it is common ground that
there was a considerable lobby in the farming world, of which the minister was
well aware. These matters were considered and, in passing the Agriculture Act
1986, it is fair to say that, taking all matters into account, as a matter of
parliamentary discretion, it was decided so to draft the 1986 Act as not to
have retroactive effect.
Thus there was created a small lacuna of
approximately two years, 1984-86, during which a tenant surrendering a lease of
land with a milk quota attached had no rights under English law to claim
compensation from his landlord.
The attitude of the minister was made
perfectly clear in a letter dated December 4 1984 (which it is not necessary to
read in detail) to the Hon Mrs Gwyneth Dunwoody MP, who had asked a question
concerning the rights of compensation to outgoing tenants. I quote only two
sentences from the penultimate paragraph:
As for compensation, a tenant is not
normally compensated for efforts in increasing production unless those efforts
provide physical benefits to the farm, eg land or building improvements funded
by the tenant in which case he is able to claim tenants improvements at the end
of his tenancy. As things stood prior to the introduction of quotas the benefit
a tenant derived from increased production was through a higher level of income
and the introduction of quotas would appear not to change that general
principle.
The regulations to which the writer, the
Rt Hon John MacGregor MP, the minister, was there referring were, of course,
the European Commission and Council regulations.
On July 13 1989 the Court of Justice of
the European Communities, in case 5/88*, gave judgment on a reference by Hubert
Wachauf in relation to an outgoers’ scheme then current in Germany. In view of
the concession made by Mr Stephen Richards for the minister, it is not
necessary for me to consider this judgment in any detail. The concession is
that as a result of the judgment there is an arguable point as to whether the
effect of the judgment was to declare that the statutory provisions current in
the United Kingdom prior to the passing of the Agriculture Act 1986 were
inconsistent with European Community law. I refer to two paragraphs from the
judgment of the European court:
19
Having regard to those criteria, it must be observed that Community
rules which, upon the expiry of the lease, had the effect of depriving the
lessee, without compensation, of the fruits of his labour and of his
investments in the tenanted holding would be incompatible with the requirements
of the protection of fundamental rights in the Community legal order. Since
those requirements are also binding on the Member States when they implement
Community rules, the Member States must, as far as possible, apply those rules
in accordance with those requirements.
. . .
21
However, that conclusion does not preclude the possibility for a
departing lessee to obtain compensation calculated on the basis of all or part
of the relevant reference quantity when that is justified by the extent of the
lessee’s contribution to the building-up of milk production on the holding. In
that event, the quantity taken into consideration for the purposes of
calculating the compensation must be treated as a freed quantity and,
consequently, may not be put at the disposal of the lessor who repossesses the
holding.
*Editor’s note: Hubert Wachauf v Bundesamt fur Ernahrung
und Forstwirtschaft (89/C207/12).
When that judgment was published it
became well reported in agricultural circles, The applicant and his advisers
considered that they had a case upon which they could base an approach to the
minister to achieve some retroactive statutory provision either by amendment of
the Agriculture Act 1986 to give it retroactive effect or otherwise to fill in
the lacuna into which this applicant fell fairly and squarely.
On March 16 1990 solicitors for the
applicant wrote to the minister setting out the position, referring to the case
of Wachauf and saying:
. . . we consider that Her Majesty’s
Government is subject to a legal duty under Community law to enact legislation
which guarantees adequate compensation to tenants upon quitting.
That was answered by a letter of April 5
from the solicitor to the ministry, stating:
The ministry does not agree with your
interpretation of the Judgment in Wachauf. That case related to the
circumstances in which compensation was payable to tenants under the Outgoers’
Scheme established in the Federal Republic of Germany pursuant to Article
4(1)(a) of Regulation 857/84. A comparable scheme was established in the United
Kingdom; . . . Your client did not make any application under that scheme.
If that which the court has been told by
counsel is correct, that at least was a misapprehension of the situation by the
writer of that letter. The scheme, we are told, was not available. But, even if
it were, for the reasons I have already given, it would not have enured to the
benefit of this applicant because it was extremely unlikely that the landlord
would have given his consent.
That is the position against which this
application for leave to apply for judicial review is brought before the court,
and I refer now to Ord 53, r 4(1). It reads, as presently printed in the 1991
version of the Supreme Court Practice:
An application for judicial review shall
be made promptly, and in any event within three months from the date when the
grounds for the application first arose, unless the court considers that there
is good reason for extending the period within which the application shall be
made
There has been argument on two points.
The first point taken by Mr Burton for the applicant was that the point of
departure or the date when the grounds for the application first arose was the
publication of the judgment in Wachauf. Mr Richards submits (and I
summarise his submission) that that is not correct. Article 177 of the Treaty
merely enables the European court to interpret the existing law, not to make
new law. The existing law created by the regulations to which I have already
referred in this judgment had existed since 1984. All that the European court
did was to declare what the law had always been. Because of the view which I
have formed on the second point, it is unnecessary for me to consider how that argument
should be resolved. It will fall for more careful argument subsequently. I
record that Mr Burton was not invited to reply to Mr Richards on this
particular point and, therefore, the matter was not fully argued before the
court. I express some doubt only as to whether a declaration under section 177
can ever be anything other than what it says it is, that is a declaration of
the law as it exists and has existed.
For the purposes of this judgment, I
assume that Mr Richards is right but that there was, at least as an arguable
point for further consideration on judicial review, an inconsistency between
the statutory provisions relating to milk quotas where leasehold farms were
concerned in the Dairy Produce Quotas Regulations 1984, and , so far as it was relevant
at all, the Outgoers’ Scheme, and Community law as it is now declared to have
been since 1984 by the European Court of Justice. On that assumption, the right
arose not within three months of the application but some five years before.
I now pass to the second part of the rule
and consider whether there is good reason, on this application for leave to
apply, to extend the period within which the application may be made.
Mr Richards has referred to the passage
of time. He has submitted that what Mr Wachauf did, so could Mr Bostock. He
says that the law was there if it had been properly appreciated and that now,
with the passage of years, to grant leave to apply for judicial review would
not only be contrary to good administration but might well prejudice third
parties. That submission was in fact referring to the provisions of section
31(6) of the Supreme Court Act 1981, which says:
Where the High Court considers that there
has been undue delay in making an application for judicial review, the court may
refuse to grant —
(a) leave for the making of the application; or
(b) [which is not relevant here] any relief
sought on the application, if it considers that the granting of the relief
sought would be likely to cause substantial hardship to, or substantially
prejudice the rights of, any person or would be detrimental to good
administration.
It is clear from the wording of that
subsection that it does not become relevant unless the court considers that
there has been undue delay. If the court considers that there is a good reason
for extending the period, then at first sight it would appear to be
inconsistent with there being undue delay and, therefore, section 31(6) should
not come into the field of consideration otherwise than, as Mr Richards
submitted, as part of the general background against which the court will
exercise its discretion. However, in R v Stratford-on-Avon District
Council, ex parte Jackson [1985] 1 WLR 1319 at p 1325 this court ruled
otherwise.
Nevertheless, questions of good
administration and prejudice to third parties are essentially matters for
examination in depth at an inter partes hearing, and I gratefully adopt what
was said by Lord Goff in R v Dairy Produce Quota Tribunal for England
and Wales, ex parte Caswell (HL(E)) [1990] 2 WLR 1320 at p 1326D:
It follows that, when an application for
leave to apply is not made promptly and in any event within three months, the
court may refuse leave on the ground of delay unless it considers that there is
good reason for extending the period; but, even if it considers that there is
such good reason, it may still refuse leave (or, where leave has been granted,
substantive relief) if in its opinion the granting of the relief sought would
be likely to cause hardship or prejudice (as specified in section 31(6)) or
would be detrimental to good administration. I imagine that, on an ex parte
application for leave to apply before a single judge, the question most likely
to be considered by him, if there has been such delay, is whether there is good
reason for extending the period under rule 4(1). Questions of hardship or
prejudice, or detriment, under section 31(6) are, I imagine, unlikely to arise
on an ex parte application, when the necessary material would in all
probability not be available to the judge. Such questions could arise on a
contested application for leave to apply, as indeed they did in Reg v Stratford-on-Avon
District Council, Ex parte Jackson; but even then, as in that case, it may
be thought better to grant leave where there is considered to be good reason to
extend the period under rule 4(1), leaving the questions arising under section
31(6) to be explored in depth on the hearing of the substantive application.
It is on the basis of those statements in
the speech of Lord Goff that we refused the application made by Mr Gordon to
intervene at this stage. There can only extremely rarely be justification for
departing from the principle applicable to these applications for leave to
apply for judicial review that they should be short and mainly for the purposes
of filtering out unmeritorious applications. The very nature of the
intervention sought by Mr Gordon is totally inconsistent with that.
In this case there is the background of a
conceded arguable point of obvious importance. Is there good reason for
extending the period in which this application could be made? I have no doubt that there are such reasons
because of a number of exceptional features. At this application stage there
must be assumed that there is at least a possibility that the minister is
wrong. This is a matter that will have to be decided at length on the inter
partes hearing as to the effect of the regulations as now interpreted by
the judgment of the European court in Wachauf’s case. If it is
established that all along there was a duty under European law upon the United
Kingdom government to make provision for the compensation of outgoing tenants
to right an obvious wrong, then that is a matter which calls for consideration
and necessary adjustment if it can reasonably be done. The misapprehension
which prevented the applicant from exercising his rights under the law promptly
was a misapprehension which was shared on the premise of this application by
the minister himself and his advisers. In my judgment, it would ill lie in the
mouth of a respondent to rest on a resistance under the provisions of 4(1) in
such circumstances.
Then Mr Richards said that, assuming that
the delay up to the judgment in Wachauf could be explained, there was
still a further delay of nine months between the announcement, albeit
informally in press reports of the judgment in Wachauf and the approach
to the minister on behalf of the applicant. Bearing in mind the overall
time-scale in this case, in the circumstances, I agree with the submissions made
by Mr Burton that those advising the applicant here behaved in a perfectly
proper and reasonable way, allowing a reasonable time for the minister to
consider his position and, if he formed the view that he should take
legislative action to implement the European regulations, to do so. A premature
inquiry would rightly be rejected. In this case a reasonable time was allowed
to elapse before an inquiry was made. The rejection of the suggestion that Wachauf
had altered
On that basis, emphasising that I am in
no way prejudging the merits of the application itself, I consider that there
is good reason for extending the period within which the application should be
made. I do not think that the provisions of section 31(6) of the Supreme Court
Act 1981 should inhibit the granting of leave to apply.
I would therefore grant leave to the
applicant to apply for judicial review.
TAYLOR and BELDAM LJJ agreed and did not
add anything.
The appeal was allowed; leave given to
apply for judicial review; costs in court below to be applicant’s costs in the
application; order for appellant’s costs of appeal to be paid by respondents;
legal aid taxation.
