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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Parry v Ministry Of Agriculture Fisheries & Food & Anor [2002] EWCA Civ 864 (23 May 2002) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/864.html Cite as: [2002] EWCA Civ 864

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
APPLICATION FOR PERMISSION TO RELY ON FURTHER EVIDENCE
APPEAL FROM ORDER OF MR JUSTICE BUCKLEY

		Royal Courts of Justice Strand London WC2 Thursday, 23rd May 2002

1. LORD JUSTICE MAY: This case is about milk quotas. The European Community takes the view, no doubt justified, that if dairy farmers were left to themselves they would produce too much milk. There is therefore community legislation designed to control milk production. Member states have milk quotas which they allocate to individual dairy farmers. If the dairy farmer produces more milk than his quota, he, or the group to which he belongs, has to pay levy. The skill of dairy farming is to see that your milk production does not exceed your quota. There are various means of doing this.
2. There is a market in quotas. So dairy farmers can buy or sell quota or they can lease it. If you are in danger of producing milk above your quota, you can, among other things, either sell heifers to reduce your total milk production or you can buy extra quota. Each of these obviously has business consequences.
3. On average, dairy farmers lose about 22 per cent of their milk herds each year. If they want to maintain their milk herd at a constant size they can do this by having or acquiring heifers with their first calf. When the calf is born, the heifer starts to produce milk thereby increasing the volume of the farmer's milk production.
4. Skilful management of a dairy herd in this way can be interrupted by the vicissitudes of farming. One such vicissitude may be if there is disease in the herd and an order is made stopping the farmer moving his cows. If this happens, the farmer cannot dispose of heifers to reduce his herd and thereby reduce his milk production. So the restriction order may result in the farmer producing milk in excess of his quota. That essentially is what happened in 1994 to Mr Parry, the claimant in this case.
5. He is a milk producer in the Welsh borders. Quota years run from 1st April each year. In early April 1994, tests indicated the possibility that there might be bovine TB in his dairy herd. On 12th April 1994, an order was made stopping Mr Parry from moving his cows. The order remained in force until 5th September 1994. During that period Mr Parry was unable to sell heifers and, as a result, in the event exceeded his quota and was subject to levy to the tune, I believe, of some £74,000.
6. Mr Parry's difficulties arose in this way. He had negotiated to buy 55 acres of neighbouring land to add to his farm. To raise money for this, he arranged to sell 200,000 litres of his milk quota at the start of the quota year. The quota which he sold was agreed to be transferred on 1st April 1994 before the restriction order. It was subsequently transferred and registered. This left him short of quota for the year, but he proposed to sell some of his heifers after they had calved in order to re-purchase sufficient quota to cover his year's production. The order stopping him moving his cows interfered with the proposed sale of the heifers. Nevertheless he went ahead with the purchase of the additional land and signed a contract to purchase it on 27th July 1994. He did not buy or lease additional quota to cover the unintended overproduction of milk until October and November 1994 when he acquired an additional 174,509 litres of quota. That however was not enough to avoid some levy for the year.
7. Administration of milk quotas in Wales is the responsibility of the defendants, a public authority. On occasions there may be excess quota which they are able to allocate to farmers who would otherwise exceed their quota. There is a discretionary scheme enabling the Intervention Board to make priority allocation of excess quota to farmers affected by orders stopping them moving their cows. This comes under paragraph 16 of the Dairy Producer Quota Regulations 1994. Paragraph 16 (5) of these regulations provides that a temporary re-allocation of quota shall not be made to a producer who sells quota or buys cows or in-calf heifers unless the Intervention Board is satisfied that the relevant transaction was entered into before the notice stopping the movement of the cows was served. This is designed to prevent the producers fiddling the system of levy for overproduction.
8. The defendants in fact operated an extension of the re-allocation scheme. The essence of this was that they awarded priority allocation of quota, according to a formula whose details do not for present purposes matter, to farmers who exceeded their quota because they had or had acquired in-calf heifers and had to retain them during the period of the restriction order. Mr Parry's complaint is that they did not do the same for farmers who had, by a transaction entered into before the restriction order was served, arranged to sell quota. This is said to be objectively unfair and to entitle Mr Parry to compensation. The defendant did not agree. So Mr Parry brought these proceedings.
9. The action was heard by Mr Justice Buckley who gave judgment on 20th October 2001. He dismissed Mr Parry's claims. This is Mr Parry's appeal against part of Mr Justice Buckley's decision. The main issue before the judge was that Mr Parry's loss resulted from misrepresentation by the defendants both orally and in their explanatory literature. Mr Justice Buckley dismissed this part of the claim upon robust and unappealable findings of fact. So Lord Justice Waller refused Mr Parry permission to appeal on the main part of his failed claim. The other way of putting the claim seems to have been something of an after-thought by
10. Mr Parry's lawyers - though none the worse for that perhaps if it were correct. It was a claim based on the contention that details of the re-allocation scheme, as it affected Mr Parry, were objectively unfair and that that entitled him to compensation.
11. Mr Justice Buckley did not think much of this part of Mr Parry's claim. He said this at paragraph 37 of his judgment:

"As to the alleged discrimination between Quota sellers and heifer buyers, I regard that as even more vigorous scraping of the barrel. Quota may be sold for various reasons including, as was the case here, to raise money or simply because the producer is planning to sell cattle and reduce his herd size. Heifers may be bought to increase the herd or presumably as a short term trading exercise, with a view to selling after calving and, I expect, for other farming reasons. The fact that reducing Quota or increasing milk herd size would tend to increase the likelihood of a milk excess in relation to Quota, cannot mean that they must be treated identically. They are separate transactions and each may be justified or arise quite independently of the other. The fact that each may result in an excess of milk does not mean they are comparable situations. One might just as well say that a serious disease and jumping out of an aeroplane are comparable situations that must be treated the same because each may lead to death. I reject this submission also."

12. Lord Justice Waller gave permission to appeal against this part of Mr Justice Buckley's judgment only. He reckoned that it raised an arguable point.
13. Paragraph 2 of Article 34 of the Treaty of European Union provides that the common organisation of agricultural markets shall be limited to exclude discrimination between producers within the Community. Comparable producers have to be treated fairly as between each other; this is called the principle of equality. The question is whether the arrangements are objectively fair and proportionate and, if arguably unequal, objectively justified.
14. Mr Mercer on behalf of Mr Parry has referred us to a number of decisions of the European Court. These include Klensch [1986] ECR 3477, a case about discrimination between milk producers in Luxembourg; Mignini [1992] ECR I-2651, a case about feedingstuff and foodstuffs; Royal Scholten-Honig [1978] ECR 2037, a case about sugar and isoglucose; Van Landschoot [1988] ECR 3443, a case about processing of animal feed; and Jokela [1998] ECR I-6267, a case about rural farming in Finland.
15. From these it may be seen that you look to the purpose of the scheme under consideration to see whether comparable producers and comparable situations are treated fairly and equally or whether there is objective justification; and that administrative inconveniences cannot justify arrangements which are manifestly unequal. The purpose of the quota system is to control milk production. That is not in issue here since the scheme under consideration has no effect on milk production as a whole. Mr Mercer says that you should look at the particular narrow purpose of the scheme which is to help farmers who may exceed their quota where there is a restriction order. There is no difference, he submits, between a farmer who exceeds his quota because he has too many heifers and one who exceeds his quota because he has too little quota. If either of these arises because of transactions entered into before notice of the restriction order is made the farmers to whom this relates are in comparable positions and should be treated equally. You should accord priority re-allocation to the farmer who has too little quota equally with the farmer who has too many heifers. He submits that this accords with Regulation 16 (5) which does not distinguish between the two situations.
16. The business reason why the farmer decides to buy heifers or sell quota is not relevant. What is relevant is the reason why the transaction - in this case to sell heifers - was frustrated. Both producers, he submits, have commercial risks which are comparable. Both are in competition with each other. Each suffers equivalent commercial consequences where, as a result of prior commitment, a restriction order affects them adversely. He submits that objective justification can only be found in the purpose of the scheme itself. The primary object of the scheme was to protect those in Mr Parry's position. In those circumstances, a policy which helps those who buy cows but not those who sell them cannot be objectively justified. The way in which the administrative extension to the scheme in the Regulations arose is relevant and does not provide a justification. He submits that on the evidence the court is not in a position to know why the extension was made. There is, he submits, no broad discretion, but an obligation to implement a narrow scheme with a narrow purpose which is fair as between those in a comparable situation.
17. Mr Mercer also has submissions about the respondents' conduct, which do not address issues in the Notice of Appeal but seem to me to go rather to the failed misrepresentation claim.
18. In the end, for all the words which have been written and said on the issue before the court, it is in my view a short point. The purpose of the extended scheme is, in my judgment, to alleviate problems faced by dairy farmers who cannot dispose of heifers in milk because of a restriction order and who for that reason exceed their quota. The restriction order places a restriction on moving cows. It does not place a restriction on acquiring quota, nor does it oblige farmers to dispose of quota. Farmers who are prevented of disposing of heifers are not, in my view, relevantly comparable with farmers who decide to dispose of quota for what may be a variety of business reasons. A farmer who disposes of quota is likely to have the financial ability to buy or lease it back if he needs to. A farmer who cannot sell his heifers cannot stop them producing milk.
19. I do not consider that the terms of Regulation 16 (5) help Mr Parry. That is acknowledged to be there to stop evasion. Putting two varieties of possible evasion in the same paragraph does not make circumstances related to those evasions relevantly comparable.
20. It may be difficult to distinguish conceptually between what is objectively fair in comparable situations and what is objectively justifiable. In my judgment, Mr Justice Buckley was correct to decide in this case that the situation of those who are prevented by a restriction order from disposing of heifers acquired under a transaction entered into before a restriction order is not comparable for the purposes of the temporary priority re-allocation scheme with the situation of those who have a prior commitment to dispose of quota. The latter were not unfairly discriminated against in comparison with the former.
21. I would dismiss this appeal.
22. LORD JUSTICE TUCKEY: I agree. Are the buyer of a heifer and the seller of quota comparable producers from the point of view of the objects of the scheme at issue in this case given that each is committed to the transaction before the restriction order is made? This is the first question we have to answer. I think the answer to it is "no" for the reasons given by Lord Justice May. They are not comparable producers because the buyer of the heifer is stuck with an animal on his farm which he cannot sell and which will potentially put him over quota when it produces milk. The seller of quota, on the other hand, has cash with which he is free to buy or lease back quota or otherwise manage the difficulty created by the restriction order. The buyer is obviously deserving of relief by way of temporary allocation of quota if it is available; the seller is not.
23. LORD JUSTICE KENNEDY: I agree with both judgments which have been delivered.
Order: Appeal dismissed with the costs assessed at £13,398.16.