Milk quotas — SLOM II quota and compensation withdrawn — Whether partnerships between applicants and others sufficient merging of assets for purposes of EC regulations — Whether ministry acted unreasonably
SLOM II is
milk and dairy herd conversion scheme introduced by the EC to provide quotas
for dairy farmers recommencing milk production after a period of compensated
non-production; damages were payable to compensate farmers who were unable to
produce milk until the introduction of Slom II. In 1991 the applicant farmers
applied in their own names to the respondent ministry for a milk quota under
SLOM II; this was provisionally granted. In June 1992 the applicants all
entered into partnerships with other farmers to recommence milk production
against the quota so that it could be made definitive. By letters dated June 21
1994 sent to the applicants the respondents withdrew the quotas and the
entitlement to compensation. The applicants sought judicial review of that
decision contending that they satisfied the requirements of the EC regulations
for the award of SLOM II quotas, the ministry had no power to withdraw the
quotas and that they had been given no opportunity to be consulted.
assets of the SLOM producer to contribute to a significant degree to the milk
production of the partnership for SLOM quotas to be given. On the facts there
was not a sufficient involvement of the applicants. They did not make a
sufficient contribution by pooling land or quotas to the partnerships. The
ministry did not act unreasonably: (1) they did not depart from their own
guidelines; (2) in each case there had been prior inspections and the ministry
took into account representations presented after the decision letter; and (3)
there was legal power to withdraw the SLOM quota.
The following
cases are referred to in this report.
Consorzio
Co-operative d’Abruzzo [1988] 1 CMLR 841; [1987]
ECR 1005
Deutsche
Milchkontor GmbH v Germany [1983] ECR 2633;
[1984] 3 CMLR 586
Fiskano
AB v Communion [1994] ECR 1–2885
Herbrink v Minister van Llandbouw, Natuurbeheer en Visserij [1994] ECR
I.223
O’Brien
(TA) v Ireland [1993] 1 CMLR 489
R v Devon County Council, ex parte Baker [1995] 1 All ER
73, CA
R v Ministry of Agriculture, Fisheries and Food, ex parte
Cox [1993] 2 CMLR 917
Spagl v Hauptzollant Rosenheim [1990] ECR 1–4539
Von
Deetzen v Hauptzollant Oldenberg [1994] 2
CMLR 487
This was an
application by St Clere’s Hall Farm, Mr Woolliscroft, Champion & Sons, Mr
Rice, Mr Margetts, Mr and Mrs Peters, Mr Frossell and Mr Hicks, for judicial
review of the decision of the
milk quotas from the applicants.
Mark Brealey
(instructed by Burges Salmon, of Bristol) appeared for the applicants; Peter
Duffy (instructed by the solicitor to the Ministry of Agriculture, Fisheries
and Food) represented the respondents.
Giving
judgment, Tucker J said:
These are applications for judicial review made by eight farmers. They challenge
a decision by the Ministry of Agriculture, Fisheries and Food (MAFF) on June 21
1994 to withdraw their milk quota allocation and their entitlement to
compensation from the EC. The case concerns what is called the SLOM II scheme,
which derives its title from a Dutch acronym for the EC non-marketing of milk
and dairy herd conversion schemes under which payments were made to milk
producers who refrained from milk production for a period of four or five
years.
There was, in
the 1970s, a glut of milk and dairy products in the EC. There were two methods
of dealing with the problem. One was to introduce a quota system, whereby
farmers’ production of milk was limited to the amount specified in a quota
allocated to them. The other was to induce farmers not to market milk at all.
If they undertook not to do so for four or five years they would be paid
compensation for their loss of income.
The latter
scheme gave rise to difficulties when farmers who had participated in it
wished, at the end of the period of abstention, to resume milk production
again. They were unable to obtain a quota. But the European Court of Justice
held that that was unlawful. So EC regulations were introduced to grant such
milk producers a quota (the SLOM II quota). In the United Kingdom MAFF had to
be satisfied by July 1 1993 that the applicants for this quota fulfilled the
conditions laid down in the regulations. In 1992 the European Court of Justice
held that the EC should pay damages by way of compensation to the milk
producers for the loss which they had suffered by not being able to market milk
for a number of years.
In 1991 the
applicants applied in their own names for a SLOM II quota, which was
provisionally granted to them. They then obtained legal advice about their
position. In reliance on this advice, in June 1992 they all entered into
partnerships (the SLOM partnerships) with other farmers in order, they submit,
to enable them to recommence milk production against the quota so that it could
be made definitive. They were all granted definitive quotas and were also all
offered large sums of money as compensation, which they accepted in each case.
They started production of milk with their partners on the basis of the
definitive SLOM II quotas.
Then, about a
year later, by letter dated June 21 1994, without, as the applicants contend,
any warning or consultation, MAFF announced their decision to withdraw the
quotas and the entitlement to compensation.
The issue is
whether MAFF acted lawfully in so doing. That depends upon the answers to two
questions. First, did the applicants meet the requirements of the EC
regulations for the award of SLOM II quotas and, in particular, did the
partnerships into which they entered comply with these regulations? Second,
were MAFF entitled to act as they did in withdrawing the quota and the offer of
compensation?
Mr Mark
Brealey, on behalf of the applicants, submits first, that MAFF incorrectly
applied the EC regulations in their decision letter, and, second, that they
acted in a manifestly unreasonable manner because: (a) the reasons which they
gave conflicted with their own earlier guidelines; (b) they failed in their
duty to consult the applicants prior to reaching their decision; and (c) they
had no power to withdraw either the quota or the offer of compensation in any
event.
Mr Brealey has
explained the history of SLOM quotas in detail, and has taken me through all
the relevant regulations and decisions of the european court. I bear these
matters in mind when considering the effect of the June 21 decision letters.
The position
of MAFF also has to be borne in mind. They are the agent for the EC and are
required to apply EC law in carrying out the community’s agricultural policy.
They are under an obligation to ensure that a scheme such as SLOM II is
strictly interpreted and to disallow any benefits if the terms of the scheme
are not adhered to. The member states are under a general duty to take measures
to ensure that the treaty obligations are effectively engaged, and in the UK it
is MAFF who are responsible for ensuring that the agricultural policy is
properly carried out. In so doing MAFF must exercise effective supervision,
which implies adequate inspections. This is important, since if the community
legislation concerned is not properly applied, the expenditure involved is
unlawful and as a consequence has to be borne by the member state itself.
According to the ECJ the member states are responsible for a strict application
of community law, as otherwise differences in interpretation and application of
community legislation would result in distortions of competition and
discriminations between operators: see The Agricultural Law of the EC by
Professor Rene Barents.
The decision
letters sent on June 21 1994 were in similar (though not in all cases precisely
identical) form. The similarity in form is not surprising since the partnership
agreements had been drawn up by the same lawyers, and were themselves in
similar, though not identical terms. It will suffice to see the letter sent to
the first applicant.
As you know,
our Field Officer recently undertook an inspection of the arrangements under
which you are producing milk against your SLOM quota. We have given very
careful consideration to the information received both from our Field Officer
and the documentation provided, and I am afraid that all the evidence presented
to us indicates that the fundamental scheme conditions have not been met.
In
particular, the partnership agreement you have entered into with Earls Hall
Farm does not meet the rules for producers operating within a partnership which
were set out in the guidance which was issued to participants in the SLOM 2
scheme. This guidance made clear that any partnership agreement ‘must accord
with the basic requirement for the quota recipient to produce against the
quota’. In the case of a genuine milk-producing partnership the SLOM quota
would be an asset of the partnership. This is not so in your case. Thus we do
not consider that your milk production partnership satisfied the production
criteria in the EC Regulations because there is no merging assets and the
partnership merely has the use of cows owned by Earls Hall Farm.
More
basically the partnership has not sought to acquire the SLOM quota. Since the
SLOM quota has been claimed by St Clere’s Hall Farm we would expect the milk to
be produced on its holding, from cows in its possession and which are managed
separately from any other cows on the holding. We would also expect separate
bulk tanks. These criteria were spelt out in the guidance notes you were sent.
Again the evidence available to us indicates that these conditions have not
been met.
I am afraid
that for all of these reasons we have no alternative but to withdraw your SLOM
2 quota allocation and the offer of compensation.
On June 27 the
applicants were informed that the withdrawal would not affect their levy
position. In other words, MAFF took the view that their decision should be
prospective only, not retrospective, and that the applicants would not be
exposed to super levy. This was because there was no evidence that any of them
had knowingly acted irregularly. It is not alleged that any of the applicants
made any false or misleading statements. The respondents’ case is that they
failed to comply with the requirements in relation to special quotas: see the
Dairy Produce Quota Regulations 1993, reg 32(4). There were no new facts which
required MAFF to look back and upset what had occurred in the past. This is
what distinguishes the present case from the case of R v Ministry of
Agriculture, Fisheries and Food, ex parte Cox [1993] 2 CMLR 917.
The conditions
which had to be met for the acquisition of an original SLOM quota were set out
in EEC regulation no 764/89. The regulation recites that SLOM producers may
claim such quotas only if they comply with certain eligibility criteria, thus
making it clear that they intend and are really able to resume milk production,
and also that the quantities granted are not intended to confer an undue
advantage but must, in fact, be produced by those to whom they are allocated.
An amending
regulation, no 1033/89, sets out the conditions for applying for a SLOM II
quota. Article 3a, para 1, provides that requests for a provisional quota can
be made by producers able to
they previously operated. However, article 7a provides that the quota ‘shall in
the event of the transfer of the holding by inheritance or by any similar
transaction, be transferred’.
The effect of
article 3a was the subject-matter of litigation in the ECJ, notably in the case
of Spagl Case C — 189/89*, where part of the article was struck down as
not meeting SLOM producers’ legitimate expectation.
*Editor’s
note: Spagl v Hauptzollant Rosenheim [1990] ECR 1-4539.
Mr Brealey,
for the applicants, places great reliance on the decision of the ECJ in O’Brien
(TA) v Ireland Case C 86/90*. He tells me that the partnership
agreements in the present case were drafted on the basis of the
Attorney-General’s opinion in that case. He submits that the facts of the
present case are very similar to those in O’Brien. In that case Mr
O’Brien, having his own land, entered into a joint venture arrangement with his
brother whereby he was granted a licence over 60 acres of adjoining land
belonging to his brother and a lease in respect of 40 cows. He also entered
into a partnership agreement with his brother whereby he was to use the cows
and land as his contribution to the partnership capital. The question for the
court to decide was whether, for the purposes of the definitive allocation of a
special reference quantity, article 3(a)(3) of regulation no 857/84, as
amended, must be interpreted as meaning that only sales or deliveries of milk
from the holding as constituted when it formed the subject of the non-marketing
or conversion undertaking may be taken into account, or whether sales or
deliveries of milk from production units, added to the holding between the date
of expiry of the non-marketing or conversion period and the date of the
provisional allocation of the special reference quantity, may also be taken
into account.
*Editor’s
note: Reported at [1993] 1 CMLR 489.
The court
stated that no provision of community law limits the sales or deliveries of
milk which may be taken into account for the purposes of the definitive
allocation of a special reference quantity solely to sales or deliveries of
milk from the holding as constituted when it formed the subject of the
non-marketing or conversion undertaking. Such a limitation would, moreover,
defeat the provisions mentioned above under which producers retain their right
to a special reference quantity where they dispose of part of their holding.
And it cannot accept that a producer who has disposed of part of his holding
should be deprived of the possibility of obtaining a special reference quantity
on the ground that the production capacity of the remaining part does not
enable him to achieve the requisite level of sales or deliveries.
Further, for
the purposes of the definitive allocation of a special reference quantity,
account may also be taken of sales or deliveries of milk from production units,
added to the holding in question between the date of expiry of the period of
non-marketing or conversion and the date of the provisional allocation of the
special reference quantity.
Mr Brealey’s
first objection to the decision letters is the reference to there being ‘no
merging of assets’. He submits that there is no such requirement in the
regulations or in the guideline notes issued by MAFF and that such a
requirement would be inconsistent with the decision in O’Brien. Mr
Brealey submits that all that is necessary is that the recipient of the quota
and his assets ‘contributed actively to the milk production’: see para 8 of the
notes. The respondents’ further notice of guidance, issued in December 1991,
suggests that: ‘A SLOM producer who wishes to produce again his SLOM quota in a
partnership (ie one who did not participate in the original scheme) may do so
only subject to fulfilling strict conditions’:
(v) The
assets of the SLOM producer — his land, buildings, plant and equipment etc —
must contribute to the milk production of the partnership. The contribution
should be an integral part of the partnership and should extend beyond, for
example, simply putting some of the SLOM producer’s land under forage crops.
Moreover, it
is submitted that the commissioner’s memorandum of November 18 1989, referring
to the requirement of ‘pooling of the assets’, falls short of what Mr Brealey
describes as ‘full blooded merger’, and does not necessarily mean transfer of
title. It is submitted that the respondents’ interpretation is not a practical
one, since many farmers are tenants, who could not merge their assets, and that
such an interpretation is not consistent with the aim of the SLOM scheme, with
the very tight time-limits.
Mr Peter
Duffy, for MAFF, says that they have never asserted that there needed to be a
full-blooded merger of assets. But it is necessary for a SLOM dairy farmer to
show that he is returning to farming in the manner indicated. It is important,
in the present cases, to note what is not being merged in the enterprise
in each case. This is dealt with in schedule 5 to the partnership agreement,
where it is clear that all the land, the quotas on each side and all milking
and dairy facilities are excluded from the partnership assets.
I agree with
Mr Brealey that there is no requirement for full-blooded merger. But it is
necessary that there should be a pooling of assets, and for the assets of the
SLOM producer to contribute (I would say to a significant, if not a
substantial, degree) to the milk production of the partnership.
In my opinion
there is not, in any of these eight cases, a sufficient contribution by those
assets. In particular, where neither the land nor the quotas are pooled, I find
it impossible to say that there has been a sufficient contribution.
It is also
important to examine what personal contribution each of the applicants makes to
the partnership in order to see whether the partnership agreements accord with
the basic requirement for the quota recipient to produce against the quota.
This appears from their affidavits.
In the case of
Mr Grantham, his farm’s contribution was to produce hay and silage for the milk
production, to graze dry cows on his farm and to attend monthly management
meetings. All the cows belonged to his partner and were milked at the partner’s
premises by the farmers of those premises. It is clear to me that Mr Grantham
is not really engaging actively in dairy farming and that it could not be said
that he or his farm were making any real or sufficient contribution to the
enterprise. Moreover, it appears that the milk production was so allocated as
to enable the partners’ excess quota to be leased out. In my opinion, the SLOM
scheme was not intended to be, or to permit, an arrangement whereby a farmer
who already had a quota could go into partnership with a SLOM farmer who was
not engaged in farming, with the result that the SLOM quota could be taken up
and the excess quota sold or leased off.
In the case of
Mr Woolliscroft, it is difficult to see what (if any) personal contribution he
makes. According to his affidavit it amounts to his secretary providing
secretarial and management services to the SLOM partnership and the holding of
meetings about once a month. In my judgment, this is not the level of activity
looked for.
Mr Champion
says that the partnership supplied straw and also carried out combine
harvesting and other tasks, and that his brother assisted with relief milking
and other tasks once or twice a month.
The extent of
Mr Rice’s participation is that he helped with relief milking approximately
once a week in 1993 and approximately once every three to four weeks in 1994
and that his farm provides the straw.
Mr Margetts,
too, produced straw, was involved whenever there was any paperwork to be done
and visited the other farm approximately once a month.
So, too, Mr
Peters produced straw, also hay and silage, and helped with the milk production
once a month or so. His wife did all the book-keeping. In this case, Mr and Mrs
Peters were in partnership with Mr Fowles, whose farm was eight or nine miles
away from their own. He was asked by the respondents in February 1992 to
explain how he would maintain the cows in buildings and on land which formed
part of his holding and milk them at Mr Fowles’ milking parlour. In his reply,
of February 28 1992, Mr Peters stated, at (c):
In answer to
your final question concerning how we propose to house and milk the cows should
we be allocated a quota, we would be renting the necessary land and buildings
from Mr Fowles to facilitate our cows which would therefore become part of our
holding.
It was on this
basis that Mr Peters’ allocation was accepted, and he was allocated a quota.
But he never fulfilled his undertaking. His explanation was that he was advised
that it was not necessary. He does not appear to have informed the respondents
of that.
Mr Frossell’s
farm, too, produced silage, straw and forage if needed — he was also involved,
attending with general management, on the setting-up and running of the cash
flow and budget systems. Mr Duffy comments with justification that Mr Frossell
was not involved in the dairy side in anything like the degree called for in a
scheme which MAFF had to administer strictly.
Mr Hicks says:
‘I did help out on an infrequent basis with milking and other tasks. Mr
Hambridge did nearly all of the milking and I do help out with the milking on
occasions’. In this case the quota originally allocated was not considered
viable, and it was increased twice, to the final quota of 453,477 litres.
In my opinion,
the position of each of these applicants is distinguishable from that of Mr
O’Brien. He used his own land, he had a licence to use adjoining land and he
leased cows. He was actively and absolutely committed to and involved in the
production of milk, whereas they are only marginally and intermittently so. His
assets and in particular his quota, were entirely directed to that end, whereas
theirs are not, not even to a significant or substantial degree. When I speak
of ‘they’ or ‘their’, I refer to the SLOM partnership as well as to the
individual persons. The test is that of sufficient involvement, which, in my
opinion, none of these applicants can meet.
It cannot be
concluded from the case of Mr O’Brien that all forms of partnership are
sufficient for qualification for a SLOM quota. There is a very great
difference, which those advising the applicants do not appear to have
recognised, between the position of a holder of a quota who wishes to get back
into farming and who actually engages himself in milk production, and that of a
person who makes a commercial profit out of selling or leasing the quota
allocated to him. There is also a difference between the position of a farmer
who passes on his holding to his children, by transfer during his lifetime, or
by inheritance, and that of a farmer who acquires a quota which he is not going
to or not in a position to use, but which he transfers to another farm for
reasons of commercial expediency. Simply to label an arrangement a partnership
does not bring it within the scope of the SLOM scheme. The observations of the
court in O’Brien, at para 15 of their judgment, upon which the
applicants rely, must be read in the light of the facts of that case and of the
words in the preceding paragraph:
However, no
provision of Community law limits the sales or deliveries of milk which may be
taken into account for the purposes of the definitive allocation of a special
reference quantity solely to sales or deliveries of milk from the holding as
constituted when it formed the subject of the non-marketing or conversion
undertaking. Such a limitation would moreover defeat the provisions mentioned
above under which producers retain their right to a special reference quantity
where they dispose of part of their holding.
The
respondents submit, and I agree, that this limited interpretation of the
judgment in O’Brien is supported by the conclusion of A-G Jacobs in para
24 of his opinion in the case:
It must
however be emphasised that, in order to receive a provisional quota under
Article 3a(1), producers must establish that they are able to produce on their
holding up to the amount requested: see Article 3a(1)(b). Similarly, by Article
3a(3), before the allocation is made definitive, producers must prove they have
actually resumed sales or deliveries from their holding. Thus, a quota is
awarded under Article 3a in order that milk be produced by the person or group
of persons to whom the quota has been allocated. That condition prevents a quota
from being awarded to an applicant who has no intention of producing milk, but
who merely wishes to enter into an arrangement with another producer in order
that the latter may produce milk on his own land while benefiting from the
former producer’s eligibility for a quota. It is accordingly for the national
court to determine, where necessary, whether any arrangements entered into by
the producer are genuinely designed to enable him to produce milk from his
holding, possibly in association with others, or whether, on the contrary, the
arrangements are merely a device intended to enable the benefit of the quota to
be transferred to another person.
These
distinctions are to my mind well recognised by the ECJ, eg in the case of Von
Deetzen II Case C — 44/89*, where the court said this in paragraph 21 of
its judgment:
*Editor’s
note: Von Deetzen v Hauptzolland Oldenberg [1994] 2 CMLR 487.
The second
sub-paragraph of Article 3a(4) of Regulation 857/84, as amended, does not give
rise, for the producers concerned, to specific restrictions of that kind which
are incompatible with the requirements of protection of their legitimate
expectations. Whilst those producers were legitimately entitled to expect to be
able to resume the marketing of milk at the end of their non-marketing or
conversion period, and to carry on that activity under conditions that involved
no discrimination between them and other milk producers, they could not thereby
expect that a common organisation of the market would confer on them a
commercial advantage which did not derive from their occupational activity.
Those producers could not therefore expect to be in a position to dispose, for
profit, of an advantage, such as the allocation of a reference quantity under
the additional levy scheme, when that advantage had been conferred on them
specifically in order to enable them to resume their occupational activity.
See also the
case of Herbrink Case C — 98/91* where the court said this at paras 18
and 19 of its judgment:
*Editor’s
note: Herbrink v Minister van Llandbouw, Natuurbeheer en
Visserij [1994] ECR I.223.
By these two
questions, which should be considered together, the national court asks
whether, for the purposes of the allocation of a special reference quantity
following the reletting of a holding to the initial lessee in collaboration
with other persons, the producer, within the meaning of Articles 3a and 12(c)
of Regulation No 857/84, and thus the person entitled to the special reference
quantity, is the association or group of persons, or only the initial lessee.
There is
nothing, on the basis of the actual wording of Articles 3a and 12(c) of
Regulation No 857/84, to preclude an initial lessee who is eligible for a
special reference quantity from carrying on his milk production activity within
the framework of an association or a group of persons formed by him and other
persons for the purposes of operating a tenanted holding. However, the Court
has held (see the judgment in von Deetzen II, cited above, paragraph
38), that a special reference quantity can be allocated only if the association
or group of persons was not formed for the sole purpose of realising, for the
benefit of the initial lessee, the marketable value of that special reference
quantity.
Did MAFF act
unreasonably? Mr Brealey submits that they acted in a manifestly unreasonable
manner in the three respects which I have already mentioned.
(a) Conflicts with their own
guidelines
These
complaints arise out of references in the decision letter to there being ‘no
merger of assets’ and ‘more basically the partnership has not sought to acquire
the SLOM quota’. It is pointed out that in para 8 of MAFF’s own guidelines to
the forms of application it is stated that: ‘The new partnership (or company)
will not be able to apply in its own right’ and ‘the recipient of the quota and
his/her assets (land, buildings etc) contribute actively to the milk
production’. And in para (v) of the December 1991 notes of guidance it is
stated that: ‘the assets of the SLOM producer must contribute to the milk
production of the partnership’. This is one of the five conditions which it is
said must be fulfilled by a SLOM producer who wishes to produce against his
SLOM quota in a partnership. Mr Brealey submits that in these circumstances it
is most unreasonable to turn round and say that the partnership has not
acquired the SLOM quota, particularly in the case where (as will appear) an
applicant has made MAFF aware of the existence of the partnership. And, says Mr
Brealey, there is no mention of merger of assets, only contribution.
So, submits Mr
Brealey, MAFF had no power to withdraw the quota, and even if they had, they
exercised a wrong discretion according to their own guidelines.
I have
referred to these guidelines earlier in this judgment and I do not need to
repeat my observations about them. In my opinion MAFF
(b) Failure to consult
In the first
place, Mr Brealey submits that two of the applicants, Mr Woolliscroft and Mr
Hicks, notified the respondents of their partnership agreements, though he says
they were under no obligation to do so, but the respondents did nothing about
it.
The
respondents’ head of milk and milk products division, Mr Harding, says in para
43 of his affidavit that Mr Woolliscroft’s SLOM partnership was not notified to
the respondents and only came to light when the respondents conducted a
verification visit in July 1993. Mr Woolliscroft’s then solicitors certainly
sent a copy of the agreement to Mr Edge, MAFF’s investigating officer, on July
19 1993. This was before the definitive allocation of quota made on November 17
1993 and the offer of compensation made on January 17 1994. In the case of Mr
Hicks, Mr Harding says that the SLOM partnership was not notified to the
respondents and it only came to light on February 3 1994 when the respondents
conducted a verification visit. Mr Brealey submits that it is clear from the
correspondence (in particular the letter of February 22 1994) that the
respondents had looked at the agreement, had taken legal advice, had on March
17 1994 made the quota definitive, and had, on April 27 1994, made an offer of
compensation.
Mr Brealey
submits that if the remaining six applicants had similarly notified MAFF of
their agreements, they would have been met with a similar response (or lack of
response). But, out of the blue, and without further consultation, came the
letter of June 21.
Mr Brealey
makes four submissions under this head: (1) there should be consultation before
adoption of a measure; (2) the decision maker must give sufficient reasons, so
that an applicant can make an intelligent response; (3) time should be given
for consideration of that response; and (4) the response should be taken into
account.
It is
submitted that the duty to consult arises out of the wider duty to act fairly,
especially in view of the widespread economic consequences which flow from the
decisions.
In this
context my attention has been invited to, and I take account of, the decision
of the Court of Appeal in R v Devon County Council, ex parte Baker
[1995] 1 All ER 73 and in particular the judgments of Dillon and Simon Brown
LJJ.
Mr Brealey
submits that the position is the same under community law. In the Fiskano
case, Case 135/92*, the court held at para 39 that:
*Editor’s
note: Fiskano AB v Communion [1994] ECR 1–2885.
observance of
the right to be heard is, in all proceedings initiated by a person which are
liable to culminate in a measure adversely affecting that person, a fundamental
principle of common law which must be guaranteed even in the absence of any
rules governing the procedure in question.
Mr Duffy
submits that there is no specific requirement to consult spelt out in the EC
regulations. Even so, it would, in my judgment, be good practice if
consultations did take place in cases such as these. I was glad to hear Mr
Duffy say that any such comment of mine would be carefully noted by MAFF and I
hope that they will do so.
However, the
decision letters of June 21 do not stand alone. True they might be described as
‘coming out of the blue’. But there had been prior inspections of the holdings
in each case, the reports of which have, at my suggestion, now been produced
and made available to the applicants and their advisers. And the matter did not
end with the letters. On July 26 the solicitors for each of the applicants sent
a letter on behalf of each individual applicant setting out in considerable
detail their objections to the decision letter and requesting the respondents
to restore the quota and the offer of compensation. It is clear to me that the
respondents took account of these views and carefully considered them. They
replied to the solicitors and to each of the applicants by letter dated August
30, dealing in detail with each of the points made. Having done so, the
decision was taken to reaffirm the original decision.
In these
circumstances, though, as I have indicated, it would have been preferable for
consultation to have taken place, I am not persuaded that it would have made
any difference to the outcome or that any injustice has thereby occurred. In my
opinion, the decisions were correct.
(c) No power to withdraw
Mr Brealey’s
submission is that MAFF states that the withdrawal was made pursuant to powers
given by regulation 32(4) Dairy Produce Quota Regulations 1993 as amended,
which came into force on February 22 1994. But, he says, the definitive
decision had already been made and MAFF are not entitled to revoke it. There
must be finality in the decision making process. He refers to EC regulation
1033/89, and to the insertion of article 3a which requires the competent
authority to verify compliance with the conditions laid down. He also refers to
EC regulation 1639/91 (the SLOM II regulation), para 3, which lays down
time-limits after which, if the producer can prove that he has reached a
certain level of production ‘the special quantity reference shall be
definitively allocated to him’.
Mr Brealey
submits that within the two-year period when these partnerships were operating,
MAFF had the opportunity to verify compliance, especially in the case of Mr
Woolliscroft and Mr Hicks. He contends that they knew of the partnerships, at
least since July 1993, and had looked at the agreements, without making any
adverse comments. He points out that the provisions of regulation 32(4) are
permissive, not mandatory, that MAFF had a discretion whether to withdraw the
whole or any part of the quota, and he submits that it was an unlawful and
unreasonable exercise of that discretion to apply this provision where MAFF
have changed their mind.
It is
submitted that even under community law, MAFF cannot withdraw a quota because
to do so would be contrary to the principle of legal certainty.
Mr Brealey
relies on the decision of the European Court of Justice in the case of Consorzio
Co-operative d’Abruzzo Case 15/85*, where the court recognised that the
withdrawal of an unlawful measure is permissible, provided that the withdrawal
occurs within a reasonable time and provided that the commission have had
sufficient regard to how far the applicant might have been led to rely on the
lawfulness of the measure. In the circumstances of that case it was held that
the withdrawal was contrary to the principles of legal certainty and of the protection
of legitimate expectations, and must therefore be annulled.
*Editor’s
note: [1988] 1 CMLR 841; [1987] ECR 1005.
Mr Brealey
submits that the same principle should apply to the present case, where, as he
submits, MAFF had ample time to make checks on the farms, and where in at least
two cases they had notice of the agreements.
However, I
agree with Mr Duffy that d’Abruzzo is sufficiently different on the
facts from the present case as to be distinguishable from it and that, in any
event, the position of any individual case may be altered by a specific
regulation. The respondents are entitled to rely on article 8 of regulation
(EEC) no 729/70, which requires member states to take the measures necessary to
satisfy themselves that transactions financed by the fund are carried out and
are executed correctly, prevent and deal with irregularities, and recover sums
lost as a result of irregularities and negligence. It is the obligation of MAFF
to make careful checks and Mr Duffy points out that the appellants were
informed that such checks would be made, and that awards might be withdrawn if
irregularities were discovered. Mr Brealey submits that article 8 does not
provide a legal basis for dealings between a member state and individuals, but
I disagree with him. I do not see how he is assisted by the case of Deutsche
Milchkontor Gmbh v Germany
cases 205 to 215/82* to which he
referred. It is clear from para 25, p2667 of the judgment in that case that:
*Editor’s
note: [1983] ECR 2633; [1984] 3 CMLR 586.
… sums unduly
paid by way of aids under the Community regulations are recovered by the
national authorities according to the rules and procedures laid down by
national legislation subject to the limits imposed by Community law on such an
application of national law.
In my opinion,
MAFF were empowered to act as they did, both by community law and by UK
regulations which implemented it and they did not act unreasonably in so doing.
They did not delay for any unreasonable time. I find that there was a legal
basis for the action which they took, and that they acted reasonably. There was
no error of law, and their decision to act as they did cannot be impugned as
being irrational.
Mr Duffy
suggested that if I entertained doubts, particularly about the relationship
between regulation 729/70 and the other regulations, or about the construction
of the regulations, I should seek guidance on the matter from the European
Court by means of a reference under RSC Ord 114 and article 177 of the treaty.
However, I do not feel any doubt and I do not therefore feel it necessary to
avail myself of that procedure.
For these
reasons each of these applications fails and is dismissed.
