Dairy produce regulations — Whether arbitrator had jurisdiction — Whether change of occupation amounted to a transfer having comparable legal effect to sale, lease or transfer by inheritance
By letter
dated March 20 1989 Mr V Holdcroft gave 12-months notice to terminate his
tenancy of Lower Moddershall Farm, which he farmed in partnership with his wife
and son, to his landlord, the county council. At the end of March 1990 the
wholesale milk quota registered at the holding was 190,373 litres. On February
27 1990 the tenant’s son and daughter-in-law purchased Holly Bank Farm, a
holding with no registered milk quota. Meanwhile, the Milk Marketing Board had
been informed that milk production would take place at both holdings. In due
course the milking herd was moved from Lower Moddershall to Holly Bank and the
tenant gave up possession of Lower Moddershall. Pursuant to para 1(1) of
Schedule 4 to the Dairy Produce Quotas Regulations 1989, an arbitrator was
appointed to determine the apportionment of milk quota between the two
holdings. In his award made on July 15 1991, the arbitrator found that there
had been three changes of occupation of Lower Moddershall in March 1990: on
March 1 milk production was taking place on both holdings when the original
partnership divided and a new partnership of the son and daughter-in-law was
created; the holding was then occupied by Mr V Holdcroft alone after the
milking herd moved to Holly Bank; and on March 25 Mr V Holdcroft gave up
possession to the county council. The arbitrator decided that the milk quota
attached to Lower Moddershall and apportioned only 42 litres to Holly Bank as a
consequence of the transfer. The appellants appealed that award, contending
that the arbitrator’s jurisdiction was limited to the events of March 1 1990
and he had been wrong to consider the further transfer of occupation by Mr V
Holdcroft to the county council.
jurisdiction and was entitled to have regard to the change of occupation on
March 25 1990. On that date there was a surrender of the tenancy which amounted
to a transfer within EEC Regulation 857/84. Further the fact that on that date
the holding was no longer used for milk production did not mean it was not a
production unit within the regulations. In any event there was a change of
occupation on March 1 1990 with the creation of the new partnership which had
‘comparable legal effects’ to a ‘sale, lease or transfer by inheritance’
justifying the jurisdiction and award of the arbitrator. In the regulations
when the expression ‘transfer’ is used this means a change of occupation and
not of legal title.
The following
case is referred to in this report.
Wachauf v Bundesamt fiir Ernä hrung und Forstwirtschaft (Case 5/88)
[1991] 1 CMLR 328; [1989] ECR 2609
This was an
appeal by WE & RA Holdcroft (a firm) from a judgment of Judge Allardice,
sitting in Staffordshire County Court, who had dismissed an appeal by way of a
case stated from an award of an arbitrator, GH Holmes FRICS, who had awarded an
apportionment of milk quota in respect of Lower Moddershall Farm, Stone,
Staffordshire, following his appointment by the President of the Royal
Institution of Chartered Surveyors.
Arthur
Stuttard (instructed by Eric Whitehead & Co, of Stafford) appeared for the
appellants; David Anderson (instructed by Walker Smith & Way, of Chester)
represented the respondents.
Giving
judgment, McCOWAN LJ said: This is an appeal from a judgment of Judge
Allardice, in Stafford County Court, on June 13 1992, whereby he dismissed the
appellant’s application to set aside the award of an arbitrator under the Diary
Produce Quotas Regulations 1989. The appeal is brought with the leave of
Farquharson LJ.
The
arbitrator’s appointment came about as follows. By regulation 10 of the Dairy
Produce Quotas Regulations 1989:
Subject to
regulations 11(4) and 12, where there is a transfer of part of a holding the
apportionment of the quota relating to that holding shall be carried out . . .
There then
follows (a) which deals with a situation where there is agreement and:
(b) in all other cases —
(i) in England and Wales and Northern Ireland by
arbitration in accordance with Schedules 4 and 6.
There is
nothing further in that regulation that I need read.
Schedule 4
para 1(1) deals with where there is agreement to the appointment of an
arbitrator.
(2) Notwithstanding subparagraph (1) above, the
transferor or the transferee may at any time within the relevant period make an
application to the President of the Royal Institution of Chartered Surveyors
(referred to in this Schedule as ‘the President’) for the appointment of an
arbitrator from among the members of the panel referred to in paragraph 8 and
the person who makes such an application to the President shall notify the
Minister in writing of that fact within fourteen days from the date of the
application.
(3) If at the expiry of the relevant period an
arbitrator has not been appointed by agreement between the transferor and the
transferee nor an application made to the President under subparagraph (2)
above, the Minister shall make an application to the President for the
appointment of an arbitrator.
Para 15 of
that Schedule reads:
Any person
having an interest in the holding to which the arbitration relates shall be
entitled to make representations to the arbitrator.
Para 1(3)
operated in this case and the Minister of Agriculture asked the president to
make an appointment of an arbitrator. He did so and the person appointed was Mr
G E Holmes FRICS. His appointment is dated August 16 1990 and it is in the
following terms, so far as is relevant. The arbitrator is appointed:
. . . for the
purpose of settling the claims, questions or differences between the interested
parties mentioned in the First Schedule hereto which are specified in the
Second Schedule hereto.
The First
Schedule reads:
Staffordshire
County Council
Mr And Mrs V
Holdcroft & Son
W E & R A
Holdcroft
The Second
Schedule reads:
To determine
the apportionment of quota between the interested parties in accordance with
the Dairy Produce Quotas Regulations 1989.
There was an
oral hearing on March 15 1991 when the appellants were represented by their
solicitor and the county council were also represented. Neither Mr V Holdcroft
nor his wife made submissions. The arbitrator’s award is dated July 15 1991 and
it was delivered on July 22 1991. His award was as follows.
The
apportionment of Quota between the interested parties in accordance with
The Diary
Produce Quotas Regulations 1989 is as follows:–
Lower
Moddershall Farm, Stone, Staffordshire — 190,331 litres
Holly Bank
Farm, Coton Hays, Milwich, Stafford — 42 litres.
I turn to his
statement of reasons. The award is headed:
Between
Staffordshire County Council (Landlord) And Mr and Mrs V Holdcroft & Son
(Former Producer) And WE & RA Holdcroft (Transferee).
Then he gives
his findings of fact in the following terms.
(1) Mr Victor Holdcroft was the Tenant of Lower
Moddershall Farm, Stone, Staffordshire, in area some 61.46 acres.
(2) The Landlord is the Staffordshire County
Council.
(3) Mr V Holdcroft gave The County Council 12
months notice to terminate his tenancy on 25th March by letter dated 20th March
1989.
(4) Mr V Holdcroft subsequently continued to
occupy a small part of Lower Moddershall Farm after the termination date.
(5) The Staffordshire County Council obtained an
Order for Possession of this land on 21st December 1990 in the Stoke-on-Trent
County Court.
(6) The Wholesale Milk Quota which was originally
registered at Lower Moddershall Farm amounted to 190,373 litres as at the end
of March 1990.
(7) Prior to the 1st March 1990 the Tenant was in
partnership with his Wife and his Son Mr WE Holdcroft trading as Mr and Mrs V
Holdcroft and Son who together occupied Lower Moddershall Farm.
(8) On or about 27th February 1990 Mr WE
Holdcroft together with his Wife Mrs RA Holdcroft purchased a property known as
Holly Bank, Coton Hays, Milwich, Stafford with about 47 acres. At that time no
Milk Quota attached to the farm.
(9) Earlier on the 12th February 1990 Mr WE
Holdcroft advised The Milk Marketing Board that he intended to move the
production of milk from Lower Moddershall to Holly Bank Farm. He identified
both these farms as his production units.
(10) On 1st March 1990 the Partnership divided. Mr
And Mrs V Holdcroft retired and Mr WE Holdcroft entered into Partnership with
his Wife Mrs RA Holdcroft under the title of WE & RA Holdcroft.
(11) On 1st March 1990 the dairy herd was at both
Holly Bank Farm and Lower Moddershall Farm. The holding at that date comprised
both Holly Bank Farm, Coton Hays, Milwich, Stafford and Lower Moddershall Farm,
Stone described by Mr WE Holdcroft as his production units. The occupiers were
WE & RA Holdcroft.
(12) Subsequently the entire dairy herd was moved
to Holly Bank Farm and milk production continued at that address. From the 2nd
March the occupier of Lower Moddershall was Mr V Holdcroft trading on his own
account. There was consequently a change of occupation at Lower Moddershall
Farm, part of the holding comprising Holly Bank Farm and Lower Moddershall
Farm.
(13) On 25th March 1990 Mr V Holdcroft vacated
Lower Moddershall Farm with the exception of the area in dispute and it was
transferred to Staffordshire County Council.
Then the award
sets out the submissions on each side, which I need not repeat. I take it up
where it reads:
This hinges
on the events which took place between 12th February and 25th March 1990.
In
chronological order these were:–
12th February
Mr WE Holdcroft advised The Milk Marketing Board that it was his intention to
move the production of milk from Lower Moddershall Farm to Holly Bank Farm. He
identified each of these farms as his production unit.
27th February
Purchase of Holly Bank Farm by WE & RA Holdcroft.
1st March
Milk production took place at both farms and was then transferred to Holly Bank
Farm and the Partnership divided and as a result of Mr and Mrs V Holdcroft
retiring and Mr WE Holdcroft entering into Partnership with his Wife Mrs RA
Holdcroft the Partnership then became known as WE & RA Holdcroft.
2nd March to
25th March The occupation of Lower Moddershall Farm reverted to Mr V Holdcroft.
25th March Lower Moddershall was transferred to Staffordshire County Council,
apart from the area in dispute which was subsequently transferred to The County
Council by order of the Court.
As far as
Lower Moddershall Farm is concerned, there were three changes of occupation
during this period. Firstly Mr and Mrs V Holdcroft & Son to WE & RA
Holdcroft. Secondly WE & RA Holdcroft to Mr V Holdcroft and, thirdly Mr V
Holdcroft to Staffordshire County Council.
On his own
admission Mr WE Holdcroft advised The Milk Marketing Board that the production
units making up his holding were Holly Bank Farm and Lower Moddershall Farm.
I am in no
doubt therefore that on 1st March part of the holding, namely Lower Moddershall
Farm, was occupied by WE & RA Holdcroft and on 2nd March when milk
production was transferred to Holly Bank Farm, Lower Moddershall Farm was in
the sole occupation of Mr V Holdcroft who was not then a member of that
Partnership.
I need not
read the next paragraph.
From the
evidence before me the dairy stock occupied Lower Moddershall Farm for most of
this five year period apart from the 1st March 1990 when they were moved to
Holly Bank Farm. It is clear therefore that any apportionment of Milk Quota
attaching to Holly Bank Farm will be minimal.
Even if the
events at the beginning of March did not give rise to a transfer of part of a
holding within the meaning of Regulation 9 of the 1989 Regulations (as in my
judgment they did) the fact would remain that on the termination of Mr V
Holdcroft’s tenancy on 25th March 1990 there was indubitably an event which
constituted the transfer of part of a holding which had been used by the
producer for milk production for most of the preceding 5 years. On either basis
therefore an apportionment falls to be made.
I need not
read the next paragraph.
Turning to the
submissions of Staffordshire County Council, I find that there was a Milk Quota
attaching to Lower Moddershall Farm at the termination of Mr V Holdcroft’s
tenancy by virtue of the fact that of the 5 year period preceding the change of
occupation on the 1st/2nd March, or alternatively the 25th March 1990, all the
areas used for milk production were on that farm with the exception of the
brief period where there was joint occupation with Holly Bank Farm.
As far as the
arrangements for the transfer of Milk Quota from Lower Moddershall Farm to
Holly Bank Farm, I accept the Form T3 was not the appropriate means of transfer
and I further accept that the Landlord’s consent should have been a necessary
pre-condition for such a transfer.
I accept that
the events from the 27th February onwards constitute a change of occupation of
part of a holding for reasons stated earlier in this statement.
For the
purpose of considering the arguments advanced in this case, I should next look
back to the Dairy Produce Quotas Regulations 1989, para 29 of the Fourth
Schedule. I need read only the second subparagraph:
Where the
arbitrator has misconducted himself, or an arbitration or award has been
improperly procured, or there is an error of law on the face of the award, the
county court may set the award aside.
In this case
the arbitrator is said to have been guilty of an error of law. I next read
regulation 9 (1):
For the
purposes of Article 7 of Council Regulation 857/84 and Article 7 of the
Commission Regulation (transfer of quota when any holding is sold, leased or
transferred by inheritance) on a transfer of any holding or part of a holding,
other than a transfer pursuant to an agreement to which paragraph 7 applies,
the transferee shall submit to the Minister —
(a) within two months of the change of occupation
of the holding or part of a holding, a duly completed form prescribed for this
purpose from time to time by the Minister, and
(b) such other evidence relating to the transfer,
and within such time, as the Minister may reasonably require.
I look then to
the Council Regulation 857/84. Article 7 (1) reads:
Where an
undertaking 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.
Article 12
reads:
For the
purposes of this Regulation the following meanings shall apply . . .
I shall not
trouble with (a) or (b).
(c) producer: a natural or legal person or group
of natural or legal persons farming a holding located within the geographical
territory of the Community:
— selling milk
or other milk products directly to the consumer, and/or
— supplying
the purchaser;
(d) holding: all the production units operated by
the producer and located within the geographical territory of the Community;
Also of
importance is Commission Regulation 1546/88 article 7. It reads so far as
relevant:
For the
purposes of applying Article 7 of Regulation (EEC) No 857/84 and without
prejudice to paragraph 3 thereof, the following rules shall apply to the
transfer of reference quantities granted to producers and purchasers in
application of formulas A and B and of reference quantities granted to
producers selling for direct consumption.
(1) Where an entire holding is sold, leased or
transferred by inheritance, the corresponding reference quantity shall be
transferred in full to the producer who takes over the holding.
(2) Where one or several parts of a holding is
sold, leased or transferred by inheritance, the corresponding reference
quantity shall be distributed among the producers operating the holding in
proportion to the areas used for milk production or according to other
objective criteria laid down by Member States . . .
I pass from
there to (3), which is particularly important in this case.
The
provisions of points 1 and 2 and of the fourth subparagraph shall be applicable
under the various national rules, in other cases of transfer which have
comparable legal effects as far as producers are concerned.
At the
arbitration hearing on March 15 1991 we are told by Mr Arthur Stuttard,
appearing for the appellants, that the solicitor representing the appellants
advanced only one argument, namely that the arbitrator had no jurisdiction. Mr
Stuttard reproduces this argument in the forefront of his case in the
submission that the arbitration provisions of the Diary Produce Quotas
Regulations were never triggered. In particular, he submits that the arbitrator
had no jurisdiction to consider the surrender of the tenancy to the county
council on March 25 1990, because he says, the arbitrator had been appointed to
consider only the events of March 1 and could not look at anything that
happened subsequently. It follows from that, he says, that the county council,
which played no part in the matter before March 25 were not an interested party
and were certainly not entitled to any quota. When faced with the appointment
of the arbitrator (which on the face of it is plainly against him) he says that
the First and Second Schedules, which I have read, are simply wrong. This
submission he bases on a letter dated May 22 1991:
As has been
emphasised at length in earlier correspondence it is the apportionment of quota
arising from the change of occupation which occurred on 1st March 1990 which is
the subject of the present arbitration. The transfer form submitted by Staffordshire
County Council must be considered quite separately from this apportionment as
it relates to a change which took place on 25th March 1990. It has not given
rise to the present arbitration. However, I note what you say in connection
with the form and accept, subject to the arbitrator’s award in the present
case, that the points you make may need to be addressed in due course.
(d) On 1st March 1990 the holding of Mr and Mrs
Holdcroft and Son comprised both Lower Moddershall Farm and Holly Bank Farm. Stafford
County Council owned Lower Moddershall Farm and therefore had an interest in
that holding.
That letter
was addressed to the appellant’s solicitors and was written by Mr J W Pitchford
of the Ministry of Agriculture, Fisheries and Foods.
The timetable
is important. The appointment of the arbitrator is dated August 16 1990. The
oral hearing before him took place on March 15 1991 and written representations
on behalf of the appellants were sent to him on May 7 1991. All that then
remained was the award which was dated July 15 1991. I fail to see how a letter
from the Ministry of Agriculture, who were not parties to the arbitration,
dated May 22 1991, could invalidate the arbitration or, indeed, affect it one
way or another.
The appellants
do not have the letter from the ministry to the President of the Royal
Institution of Chartered Surveyors asking him to appoint an arbitrator. No
attempt has been made on behalf of the appellants to obtain such a letter. In
its absence I am unwilling to assume that, in making the appointment, the
president did other than set out accurately the request of the ministry.
Indeed, if he went beyond the terms of the reference he would be guilty of
misconduct.
Accordingly I,
for my part, would reject the argument that the arbitrator acted without
jurisdiction, or that he was not entitled to have regard to the events of March
25.
For the
surrender of the tenancy on that date to produce a share of the quota for the
county council, it had to amount to a transfer by sale, lease or inheritance or
something having comparable legal effects. I am bound to say that it would not
immediately have occurred to me that a surrender of a lease could fall within
those words. But the European Court has in fact held, as Mr Stuttard conceded,
that a surrender of a lease does have comparable legal effects.
He had,
however, a further argument with regard to that surrender. It was not in the
grounds of appeal, but he had given notice of it in his skeleton argument and
we gave him leave to amend his grounds of appeal to argue that the surrender
was irrelevant because by then Lower Moddershall was:
. . . no
longer a production unit for milk and therefore no longer constituted a holding
within the meaning assigned to the term by Article 12 (d) of Council Regulation
857/84 ie All the production units operated by the producer and located within
the geographical territory of Community.
The answer to
this point is to be found in the same case in the European Court, which held
that the surrender of a lease has comparable legal effects. That is the case of
Wachauf v Bundesamt fü r Ernä hrung und Forstwirtschaft [1991] 1
CMLR 328. There were two questions for the court in that case. The first read:
Is an
agricultural production unit having neither dairy cattle nor facilities (such
as milking parlours) capable of being used exclusively for milk production a
‘holding’ within the meaning of Article 12(d) of Council Regulation 857/84 of
31 March 1984?
The answer of
the court was:
The term
‘holding’ in Article 12(d) of Council Regulation 857/84 of 31 March 1984 covers
all the agricultural production units which are the subject of a lease, even if
those units, as leased, had neither dairy cows nor the technical facilities
necessary for milk production and the lease provided for no obligation on the
part of the lessee to engage in milk production.
The second
question reads:
Is the
surrender of leased property upon the expiry of the lease a case having ‘comparable
legal effects’ within the meaning of Article 5(3) of Commission Regulation
1371/84 of 15 May 1984, (Official Journal L 132, 18.5 1984 p11), if the leased
property is an agricultural undertaking without dairy cattle and without any
facilities capable of being used only for milk production (for example, milking
parlours) and where the lease provided for no obligation on the part of the
lessee to engage in milk production?’
The answer to
that second question was:
Article 5(3)
of Commission Regulation 1371/84 of 16 May 1984 must be interpreted as applying
to the surrender, upon the expiry of the lease, of all the agricultural
production units leased, even if those units, as leased, had neither dairy cows
nor the technical facilities necessary for milk production and the lease
provided for no obligation on the part of the lessee to engage in milk
production.
It is plain,
in my judgment, from the answers to those questions that a farm is perfectly
capable of being a holding even if the cows have all gone. Moreover, as Mr
Anderson pointed out, there is a finding in the award that from March 2 1990 Mr
V Holdcroft was ‘trading on his own account’. That the arbitrator took that
view of the case can be seen from his apportionment of the quota which gave the
appellants a small part of it, whereas they would have been entitled to nothing
had the crucial date been the 1st rather than the 25th of the month. In my
judgment, the arbitrator was entitled to do so.
That would
suffice to decide the case. In fact, however, he appears also to have found
against the appellants, ignoring March 25 and concentrating on March 1. If the
vital date was March 1, submits Mr Stuttard, there was then no transfer of
occupation which was essential for the triggering of the arbitration proceedings.
He puts it in this way in his skeleton argument.
It is the
contention of the Appellants that there was no transfer of a holding or part of
a holding on 1st March 1990. On the basis of the Arbitrator’s findings in his
award, he came to the conclusion that on the date the milk production took
place at both Lower Moddershall Farm and Holly Bank Farm, and was then
transferred to Holly Bank Farm. He further found that the producer partnership
had divided and as a result of Mr and Mrs V Holdcroft retiring and Mr WE
Holdcroft entering into partnership with his wife, Mrs RA Holdcroft, the
partnership then became known as WE & RA Holdcroft. However, Mr WE
Holdcroft remained ‘the Common Factor’ in the producer partnership which
retained the same registration number.
I cannot
accept that argument. If A and B and C occupy a production unit for milk quota
purposes and A and B drop out bringing that partnership to an end, there is, in
my judgment, clearly a change of occupation when C and D form a new and
distinct partnership and take occupation. That C figures in both partnerships
is neither here nor there.
A further
problem for Mr Stuttard is that the arbitrator found as a fact that there had
been a change of occupation, and the court has no jurisdiction to go behind the
arbitrator’s findings of fact. Even if that be right, argues Mr Stuttard, such
change of occupation cannot be said to have ‘comparable legal effects’ to a
‘sale, lease or transfer by inheritance’. Remembering, however, that what we
should be talking about is a milk production unit, I take the contrary view.
There is no
definition of ‘transfer’ in the Dairy Produce Quota Regulations, but there is
of ‘transferee’ and ‘transferor’. This is to be found in regulation 2. There,
it is provided that:
‘Transferee’
means a person who replaced another person as occupier of a holding or part of
a holding;
‘Transferor’
means a person who is replaced by another person as occupier of a holding or
part of a holding.
It is plain
from this, in my judgment, that when the regulations talk about ‘transfer’ they
are talking in terms of occupation and not of legal title.
Accordingly, I
conclude that the change of occupation at the beginning of March did have
comparable legal effect to a sale, lease or transfer by inheritance. For this
reason also, and despite Mr Stuttard’s valiant efforts, I would dismiss the
appeal.
HIRST LJ and SIR TASKER WATKINS agreed and did not add anything.
Application
for stay of execution and appeal dismissed.
