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SECOND DIVISION, INNER HOUSE, COURT OF SESSION
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Lord Justice Clerk
Lord Johnston
Lord Wheatley
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[2008] CSIH 15
XA17/07
OPINION OF THE LORD
JUSTICE CLERK
in
SPECIAL CASE
stated by
THE SCOTTISH LAND COURT
in the case of
BARACHANDER FARM
Appellants;
against
THE SCOTTISH MINISTERS
Respondents:
_______
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For the appellants: Agnew of
Lochnaw QC; Thorntons-Law
For the respondents: Johnston QC,
O'Carroll; Solicitor to the Scottish
Executive
15 February 2008
Introduction
[1] The
appellants own Barachander Farm, Kilchrennan, Argyll, and trade under that
name. The appeal arises from the
decision of the respondents to refuse to pay to the appellants sheep annual
premium (SAP) for 2003. The appellants
unsuccessfully invoked the procedure open to them for review by the respondents
of their decision. They then appealed to the Scottish
Land Court.
By Order dated 6 November
2006 the Land Court refused the
appeal. The appellants now appeal
against that Order under regulation 11 of the Agricultural Subsidies (Appeals)
(Scotland)
Regulations 2004 (SSI No. 381).
The Sheep Annual Premium Scheme
Commission Regulation (EEC)
No 2700/93 and Commission Regulation (EC) No 279/94
[3] Article
1(3) of Commission Regulation (EEC) No 2700/93 (the 1993 Regulation), the
predecessor of the 2001 Regulation, defined the retention period as the period
"during which the producer undertakes to keep on his holding the number of ewes
and/or goats in respect of which the premium is requested ... " That undertaking created a difficulty for
Member States whose farming practices included the grazing of livestock off the
holding during the retention period. It
was incompatible, so far as Scotland was
concerned, with the traditional practice of away-wintering sheep in areas of
milder climate.
[4] Commission
Regulation (EC) No 279/94 (the 1994 Regulation) dealt with that
difficulty. It expressly amended the
1993 Regulation in relation to contracts of agistment by allowing the producer,
on certain conditions, to have stock located off the holding during the
retention period. Part of the preamble
was in the following terms:
"Whereas Commission Regulation (EEC) No 2700/93, as
amended by Regulation (EC) No 80/94, pursuant to Council Regulation (EEC) No
3508/92, as amended by Regulation (EC) No 165/94, and Commission Regulation
(EEC) No 3887/92 regarding the integrated administration and control system for
certain Community aid schemes, provides for the obligation whereby, as from the
1994 marketing year, producers must keep the number of ewes and/or goats in
respect of which the premium is applied for on his holding during the retention
period; whereas the application of this
rule in the sheepmeat and goatmeat sector would led to the discontinuation of a
traditional practice in some Member States;
whereas, therefore, provision should be made to allow those practices to
be continued under certain conditions and, in that connection, to derogate from
the definition of a holding as used in the context of the integrated
administration and control system;
whereas, in the case of animals placed in agistment, it is necessary to
ensure that animals moved are identified in order to make possible their
effective control and to notify in advance the periods and places where the movement
is to be carried out ... "
Article 1 gave effect to this
purpose by adding the following words to article 1(3) of the 1993 Regulation (supra):
"Before all or some of [the] ewes ... in respect of
which the premium is requested are placed in agistment during the retention
period, the animals concerned must be identified. Furthermore, as from the 1995 marketing year,
the place (or places) of retention must be indicated in the premium application
as well as, where applicable, the period (or periods) concerned. In the event of a change of place or date
relating to that period, the producer shall give prior written notification
thereof to the competent authority."
The respondents, acting through
SEERAD, are the "competent authority." I
shall discuss the expression "agistment" later.
Commission Regulation (EC) No 2419/2001
[5] Article
10 of the 2001 Regulation, which supersedes the Regulations that I have quoted,
provides inter alia as follows.
"Requirements
pertaining to livestock aid applications
1 A
livestock aid application shall contain all information necessary to establish
eligibility for the aid, in particular ...
(c) the
number of animals of each type in respect of which any aid is applied for ...
(d) where
applicable, an undertaking by the farmer to keep the animals referred to in
point (c) on his holding during the retention period and information on the
location or locations where the animals will be held including the period or
periods concerned ...
If the animal is moved to another location during
the retention period the farmer shall inform the competent authority in writing
in advance."
[6] Article
36 specifies the basis of calculation of livestock aid applications. It provides inter alia as follows:
"(3) Without
prejudice to articles 38 and 39, if the number of animals declared in an aid
application exceeds that determined as a result of administrative or
on-the-spot checks, the aid shall be calculated on the basis of the animals
determined."
[7] Article
2(s) defines an "animal determined" as "an animal for which all conditions laid
down in the rules for the granting of the aid have been met." Therefore if the farmer fails to give advance
notice of a movement of animals to another location, the animals that he moves
will cease to be "animals determined."
Consequently SAP will not be payable in respect of them. But the movement of the animals will also
constitute "irregularities" (art 38(2)), that is to say "any non-compliance
with the relevant rules for the granting of the aid in question" (art 2(h)) and
will therefore attract a penalty under article 38.
[8] Article
38, read with article 40, provides inter
alia in relation to ovine aid schemes that where the number of animals
declared in the application form exceeds the number determined by
administrative or on-the-spot checks, the aid to which the farmer would have
been entitled shall be reduced by a percentage for the period concerned or
refused altogether.
Exemptions from the penalty regime
Force majeure
[9] When
the IACS-based schemes were introduced, the sole exemption from the penalty
regime was in the case of force majeure and
exceptional circumstances. This exemption
is now set out in article 48 of the 2001 Regulation. The appellants no longer rely on this
provision.
Correction of an application
[10] Commission Regulation (EC) No 1678/98 amended the original
Regulation of 1992. It permitted the farmer
to correct errors in the application, other than those made intentionally or by
serious negligence, on certain strict conditions. The present version of this provision is in
article 44(2) of the 2001 Regulation (infra).
Lack of fault
[11] The exception for lack of fault was introduced by article 44(1)
of the 2001 Regulation (infra). The appellants rely on it. It raises the central issue.
Article 44
[12] Article 44 provides inter
alia as follows.
"1 The
reductions and exclusions provided for in this Title shall not apply where the
farmer submitted factually correct information or where he can show otherwise
that he is not at fault.
2 The
reductions and exclusions provided for in this Title shall not apply with
regard to those parts of the aid application as to which the farmer informs the
competent authority in writing that the aid application is incorrect or has
become incorrect since it was lodged, provided that the farmer has not been
informed of the competent authority's intention to carry out an on-the-spot
check and that the authority has not already informed the farmer of any
irregularity in the application."
The decision of the Land Court
The findings
[13] The Land Court heard
evidence on the facts from the appellants' farm manager and their factor; and
expert evidence on the practice of agistment and the operation of the SAP
scheme from Mr J M McDiarmid, MBE, JP, an eminent farmer and arbiter.
[14] The Land Court found that
in most of the years from 1983 until 2003 the appellants had their hoggs wintered
with John W Bowman of Carnoch, Buckie, Banffshire. All of these contracts were entered into
orally. They reflected current and
historical Scottish practice. They did
not specify what procedures were to be followed if there should be a change in circumstances
during the wintering; nor did they set out the limits of Mr Bowman's
discretion.
[15] In about September 2002 the appellants' farm manager telephoned
Mr Bowman to confirm the arrangements for the coming winter. That call and subsequent calls in October
resulted in an agreement that the appellant would send 237 hoggs for wintering
to Cullen Farm, Buckie, the location specified by Mr Bowman. Mr Bowman gave the farm manager the code
number for Cullen Farm. Sometime in
October the hoggs were delivered there.
[16] In early 2003 the appellants' factor completed an application
to SEERAD claiming SAP for 1087 animals, including the hoggs. The application form accurately specified
Cullen Farm, with its code number, as the holding on which the hoggs were then located.
[17] By about 17 February 2003, there was no longer enough forage
for the hoggs at Cullen. Mr Bowman moved
them to Muiryhall Farm, a separate holding with a different code number,
situated three miles away. He failed to
notify the appellants before he did so and thereby prevented them from giving
SEERAD prior notice of the movement under article 10(1) (supra).
[18] Mr Bowman wintered sheep for other west coast farmers and had
sheep of his own for which he claimed SAP.
He was familiar with the requirements of the SAP scheme, and in
particular with the requirement of advance notice of any intended movement of
stock during the retention period.
[19] Officials of SEERAD heard that the hoggs had been moved to
Muiryhall. On 7 March 2003 they confirmed this by an on-the-spot
check.
[20] The respondents decided that the appellants' failure to give
advance intimation of the movement of the animals to Muiryhall constituted a
breach of article 10(1). Therefore the
appellants were not only disqualified from being paid SAP for the hoggs (art
36(3), supra), but were also subject
to a penalty (art 38, supra). The irregularities were such that, applying
article 38(2) (supra), the
respondents withheld the entire amount of the SAP to which the appellants would
otherwise have been entitled.
[21] The Land Court found that
the contract between the appellants and Mr Bowman was of a kind well known
and well understood in Scottish agricultural practice that had long been in use
to govern the away-wintering of stock.
It was of the nature of a contract of care and custody for hire with an
element of services. Under such a
contract the custodian had, historically, had the duties of (i) taking
reasonable care for the welfare and well-being of the stock, and in particular
by providing them with sufficient food to keep them in good health, and (ii)
taking reasonable care to protect the owner of the stock from loss that could
reasonably be avoided. Such a contract
was not one of agency or employment and involved no element of vicarious
liability on the owner for the acts and omissions of the winterer.
[22] The Land Court concluded that by the winter of 2002-2003, with
the possible exceptions of arable farmers not having stock for which they
claimed SAP and farmers entering into wintering contracts for the first time,
graziers in Scotland who accepted sheep for wintering were universally aware of
the requirements of the SAP scheme, including the requirement of prior
notification to SEERAD of intended movements of sheep during the retention
period.
[23] The Land Court also found that, following the introduction of
the IACS-based livestock aid regime in 1992, the duty of reasonable care to
protect the owner of the stock from loss that could reasonably be avoided had
come to include an obligation upon the custodian not to do anything that might
prejudice the owner's entitlement to aid under that regime. In particular, by 2002 it had become an
implied term in sheep wintering contracts that if the winterer intended to move
the stock to another holding during the retention period, he would notify the
owner in time for him to advise SEERAD in writing of that intention.
[24] The Land Court concluded
that in moving the stock to Muiryhall without notifying the appellants, Mr
Bowman exceeded his authority and acted outwith the terms of the
agreement.
The reasoning of the Land Court
[25] The Land Court held that
it should give the 2001 Regulation a purposive interpretation. The rules relating to retention periods were
central to the livestock aid schemes.
Since retention gave rise to eligibility, it was important for SEERAD to
know where the animals were throughout the retention period. To allow a farmer to escape penalty where he
entrusted his flock to an agister perilled the proper administration of the
scheme on the farmer's choice of agister and on the agister's performance of
his obligations to the farmer.
[26] The Land Court considered
that the legislation imposed on the farmer the obligation to give notice. There was no suggestion that the farmer could
delegate responsibility for compliance with that obligation to a third
party. In Commission Regulation (EC) No 279/94
(supra), which expressly dealt with
agistment, there was no suggestion that anyone other than the farmer was
responsible for compliance. In effect,
the farmer assumed responsibility for any mistake of the agister that prevented
the farmer from complying with the scheme.
[27] Accordingly, the Land
Court held that while the appellants
were not themselves blameworthy, they were at fault on the basis that the acts
and omissions of the agister were those of the appellants themselves for the
purposes of the 2001 Regulation.
Questions of law for the Opinion of the Court
[28] The Land Court has
submitted the following questions for the opinion of this Court:
(a) Did
the Land Court err in
holding that upon a proper construction of article
44(1) of
the Commission Regulation (EC) No 2419/2001, the fault of the agister is the
fault of the appellants and accordingly that the appellants were not entitled
to the exception set out in article 44(1)?
(b) In
the whole circumstances did the Land
Court err in law in not allowing the
appellant's
appeal and in not holding that the appellants were "not at fault" in terms of
article 44(1)?
The submissions for the parties
For the appellants
[29] Counsel for the appellants submitted that the Land
Court, having found that the appellants
were not blameworthy, erred in law in starting with a purposive approach to the
interpretation of the Regulations and, in doing so, in holding that the fault
of the agister constituted the fault of the appellants. The correct approach was to construe "fault"
in its prima facie meaning
(Manchester, Salter and Moodie, Exploring
the Law, pp 92-93). On that
approach, fault referred to the fault of the farmer alone. The expressions faute and schuld in the
French and German versions of article 44 confirmed the view that fault in that
context implied blameworthiness. The
exception for force majeure and
exceptional circumstances had applied since the introduction of the IACS
schemes; but the 1993, 1994 and 2001 Regulations had shown a progressive
relaxation of the penalty provisions. Article
38(2) implied that the irregularities must be those committed by the farmer himself
(Gisela Gerken v Amt für Agrarstruktur Verden, [2004] ECR I-6369). Article 44(1) now contemplated that, in
circumstances falling short of force
majeure, an absence of
blameworthiness on the farmer's part would avoid penalisation.
For the respondents
[30] Counsel for the respondents submitted that fault implied a
failure to comply with the terms of the Scheme.
If the appellants entered into a contract with a third party for the
custody and care of their stock, they were bound by the actings of that third
party if he should cause them to be in breach of the 2001 Regulation. The objectives of the scheme necessitated
strict compliance with its requirements, however minor (cf Campbell v Scottish Ministers
2004 SLCR 1; Agrargenossenschaft Pretzch eG v
Amt für Landwirtschaft, [2002] ECR I-11053;
Maatschap Schonewille-Prins v Minister van Landbouw, [2007] ECR I-3997, at paras 53-60; Geuting v Direktor der Landwirtchaftskammer, Case
C-375/05, 4 October 2007, unrepd, at paras 38-39). If the respondents did not apply the
Community legislation correctly, sums wrongly expended under IACS schemes could
not be recovered from the European Agricultural Guidance and Guarantee Fund (United Kingdom v The Commission [1988] ECR 1749).
Conclusions
The nature and terms of the contract of agistment
[31] The verb "to agist" is derived from the Old French agister, meaning "to lodge," and
ultimately from the Latin jacitare, a
frequentative of jacere, "to lie." A
contract of agistment is a contract under which an agister agrees, for payment,
to provide grazing for, and to supervise and look after, the owner's stock on
land that the agister owns or occupies (cf Richards
v Davies, [1921] 1 Ch 90; Coldman
v Hill, [1919] 1 KB 443; R v The Inhabitants of Croft, (1819) 3 B
& Al 171, at pp 175-177).
[32] It is my impression that
although the contract of agistment is commonplace in Scotland, the term
itself is not much used. That, I think,
is because in almost every case the contract in Scotland relates to
the away-wintering of stock, and in such cases it is invariably referred to as
a contract of wintering. The contract of
wintering specifies the location of the winterings, the duration of the
contract, the number of the stock and the winterer's fee. The contract is almost invariably concluded
orally (cf Grant v Ferguson (1957) 73 Sh Ct R 264, at p
275). It is implied in a contract of
this kind that the winterer will take reasonable care for the health and the
safety of the stock by supervising them and ensuring that they are adequately
fed (ibid).
Were the appellants "not at fault"?
[33] The short question in
this case is whether the appellants were "not at fault" in terms of article
44(1) (supra) in failing to give
advance notice to SEERAD of the movement of the stock.
[34] The 2001 Regulation governs all Community aid schemes to which
IACS applies. It is essential to the
proper operation of IACS-based schemes that there should be accurate record
keeping and effective monitoring by the competent authority. In a livestock aid scheme, the knowledge of
the competent authority of the number and the location of eligible stock is
critical. For that reason, as counsel
for the appellant accepts, the rigorous penalties that apply for a breach of
the 2001 Regulation cannot be regarded as disproportionate (cf Land Baden-Wurttemburg v Schilling [2002] ECR I-4483, at para
40)).
[35] In enforcing the farmer's obligations of accuracy in livestock
aid applications, the only person with whom the competent authority is
concerned is, in my opinion, the farmer himself. The wording of article 10(1) makes that
clear. If stock are to be moved from the
location specified in the farmer's application for SAP, it is the farmer's
direct responsibility to give prior notice and to specify the new
location.
[36] I am confirmed in this view by the terms of the Commission
Regulation (EC) No 279/94 (supra),
which expressly recognised the practice of agistment in certain Member
States. In doing so, it did not relax or
transfer the direct obligations of the farmer who entered into such a contract;
nor did it refer in any way to the position of the agister. In my view, it retained the principle that
responsibility for compliance with the notification provisions remained with
the farmer.
[37] If I am right in thinking that the obligations of compliance
with the SAP scheme remain personally and directly with the farmer from first
to last, it follows that while a claimant for SAP is at liberty to contract
with a third party for the custody and care of his stock during the retention
period, such an arrangement, from the standpoint of SEERAD, is res inter alios. In the eyes of the respondents, he and the
agister are as one. In short, by
delegating responsibility for the care of his livestock, the farmer cannot
delegate his responsibilities under the 2001 Regulation.
[38] In my opinion, the submission of counsel for the appellants
that article 44(1) penalises only irregularities committed by the farmer
himself is unsound. The 2001 Regulation
seeks to deter and to penalise the unauthorised movement of stock during the
retention period (Gisela Gerken v Amt für
Agrarstruktur Verden, supra, at
paras 42-43). If the argument for the
appellants were correct, the result would be that if a farmer by his own act
committed a breach of article 10(1), he would incur a penalty; but if his
agister caused the same breach, he would not.
I cannot see how such a result would be in keeping with the objectives
of articles 36 and 38. It would
frustrate the purposes of the scheme and undermine its effective
operation. It cannot, in my view, have
been the intention underlying the 2001 Regulation.
[39] In any event, I do not accept the suggestion that the
appellants were the wholly unwitting victims of a misfortune that they were
helpless to prevent. On the Land
Court's findings, I consider that an
applicant for SAP must be held to know that any movement of his stock during
the retention period without prior notice to SEERAD will expose him to the
drastic consequences provided for by articles 36 and 38. He must also be held to know that an agister
has it in his power to move the stock from the holding, particularly if his
duty of care should necessitate it; and that if he does so without telling the
farmer, he will cause the farmer to be in breach of the Regulation. That is a risk inherent in the agistment of
stock within the SAP scheme. Since the
appellants took that risk, they cannot, in my view, be said not to have been at
fault.
[40] The view that I have taken in this case does not deprive
article 44(1) of content. Although the
case was decided under different legislation, the facts in R v MAFF, ex p W H Strawson
(Farmers) Ltd ([2002] ECR I-10737) give us some help. In that case, applicants
under an area aid scheme calculated the application areas by reference to
Ordnance Survey maps, a method said to be acceptable in the ministerial
guidance notes. The areas were found to
be overstated by reason of errors in the maps.
That case seems to me to illustrate circumstances in which it could
rightly be said that the farmer was not at fault.
[41] Counsel for the appellant raised with us the spectre that the Land
Court's decision might bring the
practice of wintering to an end. I am
not impressed. The risk in agistment that
this case has shown up is a commercial risk that the farmer takes. Farming involves countless commercial
risks. To my mind this is just one more. Both parties support the Land
Court's finding as to the term now to be
implied in such contracts in consequence of the 2001 Regulation. If, as I think, that finding is sound, a
farmer in the position of the appellants may have recourse against the agister
for the loss that he has sustained. It
may be that other means of protection against the risk are available to the
farmer, but that is not a matter for us to consider on this occasion.
Reference to the European Court
[42] The issue in this case
is such that we are bound to consider whether we should refer it to the
European Court of Justice. The
appellants' position was that if we were minded to make a reference, they would
not seek to dissuade us from that course.
The respondents' position was that a reference was unnecessary since the
matter was clear-cut.
[43] I agree with the respondents' submission. The decision of the Land
Court is plainly correct. The appellants' interpretation of article 44(1)
leads to an unreasonable and unlikely result.
In my view, there is no need for us to refer the point (cf Royal Bank of Scotland Group PLC v HM Revenue and Customs, 2007 SC 401).
Disposal
[44] I propose to your Lordships that we should answer both
questions in the negative and remit the case to the Land
Court to proceed as accords.
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SECOND DIVISION, INNER HOUSE, COURT OF SESSION
|
Lord Justice Clerk
Lord Johnston
Lord Wheatley
|
[2008] CSIH 15
XA17/07.
OPINION OF LORD JOHNSTON
in
SPECIAL CASE
stated by
THE SCOTTISH LAND COURT
in the case of
BARACHANDER FARM
Appellants;
against
THE SCOTTISH MINISTERS
Respondents:
_______
|
For the appellants: Agnew of Lochnaw QC; Thorntons-Law
For the respondents: Johnston QC,
O'Carroll; Solicitor to the Scottish
Executive
15
February 2008
[45] I have had the opportunity of reading the Opinion of your
Lordship in the chair with which I am in complete agreement. I would simply endorse the view that in my
opinion the responsibility for maintaining proper records in respect of the
claim for subsidy in relation to "animals determined" under the Regulations
cannot be delegated by the farmer to any other person and thus the question of
"fault" does not in this context feature.
Again in this respect I would agree with your Lordship's conclusions in
paragraphs [37] and [38] of the Opinion.
[46] In these circumstances I agree with the course your Lordship
proposes in paragraph [44] of the Opinion.
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SECOND DIVISION, INNER HOUSE, COURT OF SESSION
|
Lord Justice Clerk
Lord Johnston
Lord Wheatley
|
[2008] CSIH 15
XA17/07
OPINION OF LORD WHEATLEY
in
SPECIAL CASE
stated by
THE SCOTTISH LAND COURT
in the case of
BARACHANDER FARM
Appellants;
against
THE SCOTTISH MINISTERS
Respondents:
_______
|
For the appellants: Agnew of Lochnaw QC; Thorntons-Law
For the respondents: Johnston QC,
O'Carroll; Solicitor to the Scottish
Executive
15
February 2008
[47] I entirely agree with the Opinion of your Lordship in the chair
and have nothing to add.
