Supreme Court of Ireland Decisions

Kildare Meats Ltd. & Anor v. Minister for Agriculture and Food [2004] IESC 8 (29 January 2004)

 
THE SUPREME COURT

Record No. 266/01

McGuinness J.

Hardiman J.

Fennelly J.

BETWEEN

KILDARE MEATS LIMITED and KILDARE CHILLING COMPANY LIMITED

Plaintiffs/Respondents

and THE MINISTER FOR AGRICULTURE and FOOD

Defendant/Appellant

JUDGMENT delivered on the 29th day January 2004 by FENNELLY J. [Nem Diss]

This appeal relates to a claim for the payment of export refunds on beef which was exported from the territory of the European Community as long ago as 1987. The Defendant/Appellant (hereinafter "the Minister") made a decision refusing payment of the export refunds, or, more precisely, forfeiting the security provided to guarantee their export. The Plaintiff/Respondent (hereinafter "Kildare Meats") sued for payment of the amount of the refund, but did not apply for Judicial Review or otherwise directly challenge the Minister's decision. The High Court heard the claim as a straightforward claim for money due. Kildare Meats succeeded.

Mr Justice Smyth, in his judgment of 31^st July 2001, declared that a sum of money to be quantified was due properly from the Minister to Respondent in respect of the exportation to the Lebanon via Port Said in Egypt on or about the 8^th or 9^th June 1987 of 8,435 cartons weighing 222 metric tonnes of frozen boneless beef together with interest for a period of five years.

The Minister makes a preliminary point on the hearing of the appeal. It is that the action was not maintainable, because Kildare Meats had never challenged the validity of his decision. Since the decision of the Minister remains in force, Kildare Meats is not entitled to payment of the export refunds. This judgment deals with that preliminary issue only.

I will refer, firstly, to the main facts concerning the export of the beef and to the proceedings to date; secondly, I will, describe the system of export refunds; thirdly, I will consider the arguments of the parties.

The Facts

On 26^th of April 1987, the m.v. Igloo sailed from the port of Greenore, destined for Port Said carrying a consignment of almost 500 tonnes of beef net weight.

Prior to the exportation, Kildare Meats had secured the Minister's decision to pay in advance the applicable export refunds in respect of export of the goods outside the Community. These amounts had been paid and the appropriate security provided by a financial institution, in accordance with the applicable Regulations. Kildare Meats had completed the necessary declarations and had placed the goods under customs control. The consignee was declared to be the Egyptian Company for Meat Poultry and Food Supply, Cairo. The beef was accompanied by certificates that it had been inspected by a veterinary surgeon and was "sound, healthful, wholesome and otherwise fit for human food." The Minister had also provided a Sanitary Certificate to the effect that the meat was free from "any sign of decay or putrefaction rancidity or abnormal or offensive odour."

According to the bill of lading, the beef was consigned to the Egyptian Company for Meat Poultry and Food Supply and was to be discharged at Alexandria or Port Said. It appears that the Egyptian authorities, in circumstances which are in dispute, rejected part of the beef on grounds of alleged unfitness. The learned trial judge did not accept that the beef was unfit. As will appear later in this judgment, it is not necessary to arrive at any conclusion on that issue for the resolution of this appeal.

The rejected part of the consignment was reshipped under a new bill of lading, also purportedly dated 26^th April 1987, in respect of 231.3818 net tonnes, destined for Beirut in the Lebanon and consigned to Dekermendjian Freres.

Kildare Meats claimed that, by exporting the meat to the Lebanon, it had complied with all requirements of the export refund scheme. It submitted documents to the Minister as proof. From about February 1988, it commenced to demand release of its security. There followed, over a period of some two and a half years, protracted correspondence concerning the adequacy of proofs provided by Kildare Meats. The Minister sought explanations for the fact that the beef had sent on from Egypt to the Lebanon, the authenticity of the Lebanon import document and other proof that the beef had been sold for home consumption in that country.

It is unnecessary and would be inappropriate, in addressing the preliminary issue, to discuss the merits of the positions adopted by the parties in respect of these issues. To do so would beg the question of whether the learned trial judge was correct in adopting the burden of deciding the issues in contention himself, rather than, as proposed on behalf of the Minister, considering the correctness of the Minister's decision.

It suffices to mention, without comment, that the Minister, in correspondence, drew attention, inter alia, to the following points:

Evidence, which he claimed to have, suggesting that the Egyptian authorities had rejected the goods on health grounds;
The need for an explanation of the import of the goods into Egypt and re-export from that country;
Discrepancies in documents in respect of dates of transport, weights and numbers of beef cartons;

Suggestions of persistent irregularities in respect of export to Lebanon and the consequent need to have import documentation authenticated;

The suggested need for supplementary proof of import for home consumption in the Lebanon.

Kildare Meats sought to satisfy the Minister that it had fully complied with his legitimate requirements. It sought additional documentary proofs and furnished additional information.

Matters came to a head in October 1990. The Minister wrote on 22^nd October, giving notice that he was declaring forfeit the sum of £366,437.14 being security in respect of advance payment of export refunds plus regulatory penalty. He gave the following reasons:

"(i) Clear, incontrovertible evidence has not been submitted of the import of the beef into Lebanon for home use. Such evidence as has been submitted contains contradictory statements as regards quantities and dates of import.

(ii) Evidence has not been submitted that the product was of sound and fair marketable quality and fit for human consumption at the time of shipment to Lebanon notwithstanding its rejection by the Egyptian authorities.

(iii) The bill of lading submitted as evidence of transport of the beef from Ireland to Lebanon is not considered to be in compliance with Art 20.5 of Regulation 2730/70."

The Proceedings

In the Plenary Summons issued on 12^th November 1990, Kildare Meats sought an injunction restraining the Minister from forfeiting the security and damages. In the event, Lardner J refused an application for an interlocutory injunction. In the Statement of Claim delivered 2^nd January 1991, Kildare Meats referred to the export of the meat and the Minister's decision purporting to forfeit the security. It pleaded that the Minister was not entitled to demand "payment of the said advance payments together with the regulatory penalty but rather is indebted to [Kildare Meats] in the amount detailed above." This refers to the amount of the export refund claimed. The Statement of Claim than sought a declaration that the relevant sum "is properly due" by the Minister to Kildare Meats as well as a smaller sum by way of additional export refund, which was not allowed by Smyth J and which is not now relevant. No application for Judicial Review was made nor does the Statement of Claim impugn the decision of the Minister on any ground that might provide the basis for such an application.

The Defence of the Minister consists essentially of a denial of liability. It does not propound the decision of 22^nd October 1990 as a bar to the plaintiff's claim.

After a delay of almost a decade, which remains unexplained, the case came on for trial before Smyth J in June 2001. The hearing lasted six days.

At the hearing in the High Court, counsel on behalf of the Minister submitted, as a preliminary matter that the Minister, by his decision of 22^nd October 1990, had decided that Kildare Meats was not entitled to export refunds in respect of the beef claimed to have been imported into the Lebanon. Since that decision had not been impugned on any of the established grounds for Judicial Review, the plaintiff's claim must fail. Furthermore, in any challenge to the correctness of the Minister's decision, the court should confine itself to the evidence which was before the Minister at the time he made his decision. In particular, evidence should not be admitted of matters which could have been furnished to the Minister in response to his requests for further information. Objection was, accordingly, taken to the admissibility of any oral evidence of any matters which were not before the Minister when he made his decision.

The learned trial judge did not accept the Minister's submissions. He said that it was not a case of Judicial Review and heard the entire matter on its merits. He assessed the evidence himself and made findings, for example, on the question of the condition of the beef and the facts surrounding import into the Lebanon.

The appeal

The Minister reiterates these arguments on this appeal. In particular he says that the learned trial judge erred in law by usurping the role of the Minister as the competent authority for Ireland and the paying agent for the Commission of the European Communities under the Community Regulations. He should have approached the claim as one constituting a challenge to the validity and/or legality of the decision. That matter should have been considered on the basis of the evidence and documentation which was before the Minister at the time when he made the decision.

Counsel for the Minister both in written submissions and on the hearing of the appeal referred in some detail to the legislative and regulatory framework within which the scheme for the payment of export refunds takes place, in order to demonstrate, in particular, that it is the Minister who must satisfy himself that a trader has complied with the provisions of any applicable Regulations. I will refer to some of these provisions in more detail, when explaining my conclusion.

Kildare Meats accepts that its action was a substantive plenary action and that it sought to establish its entitlement to export refunds under Irish law. Its claim was neither an appeal nor a Judicial Review action. It sought to establish not that the Minister was right or wrong per se in coming to his decision but rather Kildare Meats' compliance with Community law and thus its entitlement to the export refunds. Turning to the substantive claim to the export refunds, it was argued that the under the Regulations that the relationship between the parties as constituted by certain of the administrative documents for export was "in effect …a contractual relationship." Although Kildare Meats furnished very detailed written submissions to the Court, these concern principally the claimed right to the payment of the export refunds by reason of the directly effective provisions of Community law. In response to the complaint regarding the admission of the oral evidence of certain witnesses, it is stated that, since this was a plenary action, the evidence was admissible. In other parts of its submissions, Kildare Meats undoubtedly criticises the decision as such, and advances arguments appropriate to a Judicial Review. However, this seems to me to be rather beside the point. It is common case that the matter was not heard as a Judicial Review in the High Court.

What needs to be decided is the nature of, not only the system of export refunds, but the administration more generally of the Common Agricultural Policy (CAP) of the European Communities as implemented in this State.

Export refunds

The system of export refunds is part of the CAP. For many years, a mass of regulations has provided for the payment of export refunds in respect of the export of many agricultural products. The basic object of the system is to dispose of surplus European Community produce on third country markets. As was stated by Advocate General Reischl in his opinion in Case 125/75 Eier-Kontor v Hauptzollamt Hamburg-Jonas, [1977] ECR 771 at page 788, "the object of the refund rules…is to make Community products competitive as to price and to secure their sale on the markets of third countries." However, since Community prices are generally higher than those prevailing on world markets, this can only done by the European Community providing the form of subsidy known as an export refund.

It is not surprising, given the unexplained antiquity of Kildare Meats' action, that all of the important European Community regulations relevant to the case have now been repealed and replaced.

Council Regulation EEC 805/68 had provided for the payment of export refunds in respect of exports form the Community of beef and veal. At the time of the Kildare Meats export transaction, with which we are concerned, the detailed rules were laid down by Commission Regulation (EEC) No 2730/79 of 29 November 1979 laying down common detailed rules for the application of the system of export refunds on agricultural products. As stated in one of the recitals, payment could only be made subject to the condition that the product had not only left the geographical territory of the Community but had also been imported into a non-member country. The Commission Regulation laid down the common detailed rules for the application of the system of export refunds. Those rules comprised the following principal steps:

a declaration by which the exporter stated his intention to export the products in question and qualify for a refund;


placing the products under customs control prior to export;


the document to be used on the completion of customs export formalities in order for products to qualify for a refund;


the furnishing of proof that the product in respect of which customs export formalities had been completed had, within 60 days from the day of completion of such formalities, left the geographical territory of the Community unaltered.

payment of the refund on exports to a non-member country, only if the product had been imported into a non-member country for which the refund was prescribed;

prescribed documentary proofs, which, when produced, were deemed to establish that the goods were to be considered to have been imported into the non-member country;

non-payment of the refund for products which were not of sound and fair marketable quality or on products intended for human consumption whose characteristics or condition exclude or substantially impair their use for that purpose.

The basic CAP regulation was Council Regulation (EEC) No 729/70 of the Council on the financing of the common agricultural policy, since replaced. Article 1 provided for the establishment of The European Agricultural Guidance and Guarantee Fund, in two parts: the Guarantee Section; the Guidance Section. Export refunds were financed by the former. Article 4 required Member States to designate the authorities and bodies which they empowered to effect this expenditure and to communicate their particulars to the Commission. Member States were required to draw up and furnish to the Commission, annual accounts of its conduct of the responsibilities of its designated intervention agent. Article 8(1) provided:

The Member States in accordance with national provisions laid down by law, regulation or administrative action shall take the measures necessary to:

- satisfy themselves that transactions financed by the Fund are actually carried out and are executed correctly;

- prevent and deal with irregularities; - recover sums lost as a result of irregularities or negligence.

The Minister was designated by the European Communities Common Agricultural Policy) (Market Intervention) Regulations, 1973 (S.I. No. 24/1973) to act as intervention agent in Ireland for this purpose.

Conclusion

The essence of the submission of Kildare Meats is that it is unnecessary for it to challenge the decision of the Minister. Although that decision, rightly or wrongly, purported to deprive Kildare Meats of the entitlement it should otherwise have had to be paid export refunds, if it had fully complied with the Regulations, and purported to forfeit the security provided, Kildare Meats could ignore that decision and proceed directly to court, asking the High Court to decide all disputed aspects of the transaction and award the export refunds to the plaintiff.

I am satisfied that this argument is misconceived. It is necessary to bear in mind the entire structure of the system for the administration of the CAP. Article 4 of Council Regulation 729/70 requires the Member States to designate the authorities and bodies which they empower to effect this expenditure. Ireland has, by S.I. 24 of 1973 designated the Minister for that purpose. No doubt a theoretical case could be constructed for the proposition advanced on behalf of Kildare Meats, where all the Minister's requirements have been met and he stubbornly refuses to pay. Even in such a case, the relationship does not fall under the private law of contract.

A detailed analysis of the key Regulation in this case, Commission Regulation 2730/79, demonstrates the administrative nature and, therefore, public-law character, of the function of paying export refunds. Article 9(1) provides that the "refund shall be paid only upon proof being furnished that the product in respect of which customs formalities have been completed has, within 60 days …… reached its destination unaltered …… or … … left the geographical territory of the Community unaltered." The same provision permits "the competent agency of the Member State" to extend that time limit. In some cases (Article 10) additional proof of import into a non-member country may be required, to wit, "where there is serious doubt as to the true destination of the product." In cases mentioned in this Article, "the competent authorities of the Member States may require satisfactory additional proof that the product has been placed on the market in the non-member country of import." Article 20, which applies in the present case, provides for refunds varying according to the destination non-member country. Here Article 20(3) provides for the documents which prove that certain "formalities have been completed…" Article 20(4) envisages cases where the proofs are "considered inadequate." Article 30(1) states:

"The refund shall be paid only on written application by the exporter and shall be paid by the Member State in whose territory customs export formalities were completed. Member States may prescribe a special form to be used for this purpose".

Regulation 2730/79, like many other CAP regulations, established an administrative system. It set up the machinery for the payment of export refunds. The competent authorities designated by the Member States were required to take a number of designated steps to operate the scheme. This involves the exercise of discretion, in certain cases, and the carrying out of supervision in others. The basic paying provision entailed the production to the competent authority of documentary proofs covering each stage of the transaction, commencing with the placing of the goods under customs control prior to export and ending with the import of the goods into a non-member country for which the refund is prescribed. International trade generates appropriate documents for these purposes. Cases of irregularity or fraud are covered by specific provisions. It is expected that the competent authority, usually called the Intervention Agency, will handle all aspects of the scheme administratively and make decisions capable, in order to protect the interests of affected traders, of being judicially reviewed.

Most relevant to the present case is Article 15, which provided:

"1. Member States may advance to the exporter all or part of the amount of the refund as soon as customs export formalities are completed , on condition that he provides security to guarantee repayment of the amount advanced plus 15%.

2. The amount advanced plus 15 %, as referred to in paragraph 1, shall be repaid by the exporter in proportion to the quantities in respect of which the proof required by this regulation to qualify for the refund is not furnished within the period stipulated in article 31.
where , however , by reason of force majeure :
- the proof referred to above cannot be furnished , the additional 15 % shall not be charged ,
- the product is delivered to a destination other than that for which the advance was calculated , repayment of that advance shall be limited to the amount to which the exporter is not entitled .

3. If the amount is not repaid after being requested, the security shall be forfeited in proportion to the quantities concerned."

It was pursuant to this provision that the Minister made his decision, communicated on 22^nd October 1990, purporting to forfeit the security.

This decision, until set aside or abandoned, had the effect, once the security had been forfeited, of depriving Kildare Meats of its right to the export refunds claimed. The decision could not simply be ignored or bypassed by a direct claim for payment of the refunds. Kildare Meats' proceedings were, therefore, misconceived.

I am also, however, of opinion that the defence filed on behalf of the Minister as long ago as 1991 should have taken clear objection to the form of proceedings. It was not sufficient simply to deny liability. If the matter had been clearly pleaded, Kildare Meats would have had an opportunity to amend its pleadings. I am satisfied, for this reason, that it would be unjust to defeat the plaintiff's claim, without giving it an opportunity to reformulate its claim. I would, therefore, allow the appeal and set aside the judgment and order of the High Court. However, I would propose that Kildare Meats be given liberty to amend its pleadings so as to challenge the decision of the Minister and that the Minister should be accorded a corresponding facility. The parties should be heard concerning the periods necessary for these amendments. Otherwise, the case should be remitted to the High Court.