Source: http://www.scottish-land-court.org.uk/decisions/SLC.108.11.rub.html
Timestamp: 2018-10-20 14:49:43
Document Index: 20370182

Matched Legal Cases: ['arts 13', 'art 14', 'arts 15', 'art 93', 'art 94', 'arts 37', 'art 4', 'art 36', 'arts 37', 'art 4', 'art 1', 'art 71', 'arts 18', 'arts 1', 'art 36', 'arts 36', 'arts 93', 'art 93', 'arts 37', 'art 37', 'art 36', 'art 37', 'art 36', 'art 1', 'art 1', 'art 36', 'art 6', 'art 36', 'arts 66', 'art 72', 'art 37', 'art 5', 'art 37', 'art 36', 'arts 1', 'art 36', 'art 1', 'art 37', 'art 36', 'art 18', 'art 71', 'art 71', 'art 49', 'art 5', 'art 5', 'art 13']

Rubric: Messrs W J Henderson & Sons v The Scottish Ministers
(Lord McGhie, Sheriff R J MacLeod, Mr A Macdonald)
MESSRS W J HENDERSON & SONS v THE SCOTTISH MINISTERS
(Application RN SLC 108/11 – Order of 29 May 2012)
AGRICULTURE – AGRICULTURAL SUBSIDIES APPEALS – LFASS – SFP – “ACTIVELY FARMED” – ACTIVE FARMING – DEFINITION PROVISIONS – SHORT TERM PURCHASE AND RE-SALE ARRANGEMENTS – LOW STOCKING DENSITY – HOLDING REMOTE FROM MAIN FARM – THIRD PARTY LOOKING AFTER STOCK – “RELEVANT DECISIONS” – PERSONAL BAR – LEGITIMATE EXPECTATION – SUBSTITUTION OF PENALTIES – RURAL PAYMENTS (APPEALS) (SCOTLAND) REGULATIONS 2009 –LESS FAVOURED AREA SUPPORT SCHEME (SCOTLAND) REGULATIONS 2007 (AS AMENDED AND APPLICABLE IN 2009).
The appellants farmed a holding carrying some 400 suckler cows, 1300 other beef cattle and 425 ewes and gimmers near Dumfries. They entered into a “lease” of 320 ha land some 40 miles distant from their main holding. The land was not defined but was part of a larger area in respect of which another “tenant” also had grazing rights under a similar arrangement. The duration was from 1 April to 31 October 2009. In terms of a back-letter the tenants undertook to buy 80 ewe hoggs from the landlords on 12 May 2009 for a price of £45 per head and to sell to the landlords 80 gimmers at the same price per head on 31 October 2009. The sheep were to be separately identified on the holding. The landlords were to be responsible for cross-compliance obligations and day to day management of the sheep. The respondents took the view that the appellant’s arrangements did not constitute active farming of the land in question by the appellants. Under the rules for calculating penalty, the appellants’ whole 2009 LFAS claim was disallowed.
The relevant EU Regulations showed an intention to make changes to the LFAS scheme. These had not been implemented at the relevant date. But there had been some changes to the domestic regulations including the introduction of an express requirement of active farming. However, “actively farm” was expressly defined in the Regulations. The relevant part of the definition was “(a) to undertake a continuous activity which is, in the opinion of the Scottish Ministers, an agricultural activity”. The Ministers had purported to apply their discretion to the determination of whether the appellant’s activities could properly be described as “active farming”. They set out a list of factors taken into account as justifying a negative conclusion, founding strongly on low stocking density. However it did not appear that they had ever addressed the matter in terms of the definition. For the appellants various submissions were made as to the specific penalty provisions relied on by the respondent. It was also contended that as an official of the respondent had expressed approval of an identical scheme in 2001, the respondents were personally barred from imposing a penalty in relation to 2009.
HELD (1) that although the factors relied on might have justified a decision that the appellants were not actively farming the land in question, the definition did not rely on any concept of “active farming” and the respondents had not addressed the correct question; (2) their penalty could not stand; (3) that the Court would consider for itself whether, in the established circumstances, a penalty should be applied even if that would be under a different provision; but (4) there were no circumstances justifying penalty in the present case. NOTE that the Court doubted whether the averments could possibly have supported a plea of personal bar but was satisfied that in the context of exercise of public functions the appropriate remedy lay in the concept of “legitimate expectation” rather than personal bar. Very clear and specific pleading would be expected in support of any plea of bar or legitimate expectation.
[1] This is an appeal under the Rural Payments (Appeals) (Scotland) Regulations 2009 (“the Appeal Regulations”) by Messrs W. J. Henderson & Sons, a partnership farming at Carswadda, Lochanhead, Dumfries. The appeal is against a decision of the respondents following upon a review hearing in terms of said Regulations upholding an earlier decision to refuse the appellants’ 2009 Less Favoured Area Support Scheme (“LFASS”, or “LFAS” where the reference is simply to Less Favoured Areas Support) claim. The original decision was dated 17 January 2011 and the review decision 31 May 2011. As will be seen the perceived issue was whether the appellants were actively farming a small area of land they had taken on short term lease at Kirkhope. The respondents decided that they were not. It was not disputed that if that decision was properly taken the appropriate penalty was loss of the appellants’ whole LFAS claim.
[2] We heard the appeal at Edinburgh on 8 and 9 March, 2012. The appellants were represented by Miss Heather Walker, solicitor, and the respondents by Mr Donald Cameron, advocate.
[3] In the course of Miss Walker’s submissions a question arose as to whether we had jurisdiction to hear this appeal. That was because the European Regulations under which the respondents purported to act when imposing the foresaid penalty, European Council Regulation (EC) No 1698/2005 and European Commission Regulation (EC) No 1975/2006, are not listed in the Schedule to the foresaid Appeal Regulations, which schedule lists “Relevant Decisions” against which appeal can be taken under the Regulations. However, for reasons which we explain more fully below, we are satisfied that we have jurisdiction to deal with the appeal as it relates in essence to a decision taken under the Less Favoured Area Support Scheme (Scotland) Regulations 2007 (as amended and applicable in 2009) – (“the 2007 Regulations).
[4] The background to the appeal involves an unusual arrangement. However, there are other appeals pending before us which arise from similar arrangements and this case was treated as a test case. The other appeals have been sisted pending its outcome.
[5] The appellants farm a large beef suckler cow and beef finishing unit carrying some 400 suckler cows, 1300 other beef cattle and 425 ewes and gimmers at Carswadda, Lochanhead, near Dumfries. In May 2009 they entered into a lease with Messrs A & E Kirkpatrick, the owners of land some 40 miles distant by road from the appellants’ main holding. The arrangement comprised an offer to let from the landlords to the tenants and a back letter. The lease was a grazing lease of 320 ha forming part of the farms and land of Kirkhope. It was not disputed that they had entered similar arrangements in the years from about 2001 to 2008 although this was not a matter of express averment or agreement. A peculiarity was that the 320 ha area was not defined but was part of a larger area in respect of part of which another “tenant” also had grazing rights under a similar arrangement. Although it is questionable whether such an arrangement was properly to be regarded as a valid lease, no challenge on that basis was made by the respondents and the appeal proceeded on the basis that this was a valid grazing lease or, at all events, an arrangement which entitled the appellants to claim an area of 320 ha as LFAS eligible land. The duration was from 1 April to 31 October 2009. The rent was £4,800. The appellants as tenants were expressly taken bound to comply with such legislation or codes of practice as were or might be in existence “in relation to animal husbandry, livestock movements and or records, pesticides, wastes and effluents”. One condition of the offer of let was that the tenants would “make good any shortfall in 2009 LFAS which [the landlords] may sustain as a result of the arrangement”. In terms of the back-letter the tenants undertook to buy 80 ewe hoggs from the landlords on 12 May 2009 for a price of £45 perhead and to sell to the landlords 80 gimmers at the same price per head on 31 October 2009. The sheep were to be separately identified on the holding. The landlords were to be responsible for “cross-compliance obligations in terms of the Single Farm Payment Scheme (2005) Regulations”. Although not specified in the back-letter it was also the case that the landlords were to be responsible for the day to day management of the sheep.
[6] As to the purpose of this arrangement, it was said to relate, in part at least, to the need for the tenants to secure additional land to take up all their Single Farm Payment (“SFP”) entitlements. The leasing of “naked acres” might have achieved that purpose. What the reason was for the arrangement involving sheep was not adequately explained to us. Although the provision for compensation of the landlord in respect of any shortfall in LFASS which he might suffer was not self explanatory, it appears that it reflected the understanding of the parties to the agreement that, but for the lease, the landlord himself would have been able to claim LFAS in respect of the land in question. Accordingly all LFAS which the tenant received would go to compensate the landlord for the LFAS he might otherwise have had himself. This is consistent with what we were told and with what is said in the parties’ pleadings – that the tenants paid the landlords the amount of LFAS attributable to this 320 ha acre. In short, it seems that the intention may have been to allow the appellants to use the land to release their entitlements to SFP while effectively allowing the landowner to continue to have the benefit of LFAS even when the land was leased. However, it is clear that the arrangement was intended to give the appellants the right to claim LFAS.
[7] The problem for the appellants was that, unlike SFP, the domestic rules for LFASS appeared to require the land, in the respect of which a claim is made, to be “actively farmed”. That was in terms of reg 5 of the 2007 Regulations. The respondents took the view that the appellant’s arrangements did not constitute active farming of the land in question by the appellants. Although the appellants had other land which was eligible for LFAS, the result of applying the respondents’ rules for calculating penalty was that the appellants’ whole 2009 LFAS claim was disallowed. As decisions made under the 2007 Regulations are “relevant decisions” for the purpose of the Appeal Regulations – para 13 of the Schedule to the Appeal Regulations – we are satisfied that thisgives us jurisdiction to hear the present appeal.
European Council Regulation (EC) No 1257/1999
European Council Regulation (EC) No 1258/1999
European Commission Regulations (EC) No 1750/1999
European Council Regulation (EC) No 1698/2005
European Council Regulation (EC) No 1290/2005
European Commission Regulation (EC) No 1975/2006
The Less Favoured Area Support Scheme (Scotland) Amendment Regulations 2008
The Less Favoured Area Support Scheme (Scotland) Amendment Regulations 2009
The Rural Payments (Appeals) Regulations 2009
Barrachander Farm v The Scottish Ministers 2008 SC 341
Crofters Commission v The Scottish Ministers & Anr 2001 SLCR 93
Emsland-Starke GmbH v Hauptzollamt Hamburg-Jonas ECJ C-110/99
Gatty v Maclaine 1921 SC(HL) 1
Ninewells Ltd v The Scottish Ministers SLC 173/10 24 May 20111
Oosterhof & Co v The Scottish Ministers SLC 29/10 11 February 2011
Secretary of State for Education and Science v Tameside M. B. C.[1977] AC 1014
R v Monopolies and Mergers Commission, ex parte South Yorkshire Transport Ltd [1993] 1 WLR 23
R v North and East Devon Health Authority, Ex p Coughlan [2001] QB 213
R (Reprotech (Pebsham) Ltd) v East Sussex County Council [2003] 1 WLR 348
William Grant & Sons Ltd v Glen Catrine Bonded Warehouse Ltd 2001 SC 901
Reid & Blackie, Personal Bar, 2006, paras 2-15, 2-16, 5-07 to 5-14
Gloag and Henderson, The Law of Scotland 12th Ed.
(i) European
[8] In 1999 legislation was promulgated at European level which, in effect, introduced a new rural development regime throughout the European Community with effect from 1 January 2000. That regime was constituted by Council Regulations (EC) Nos 1257 and 1258 and Commission Regulation (EC) No 1750 both 1999. Regulation 1257 laid out the framework. Although we have concluded that the substantive issues turn on the provisions of the domestic 2007 Regulations, we heard submissions laying out the full detail of the underlying European Regulations and as this has a bearing on the respondents’ “abuse of right” plea and is relevant to the appellants’ contention that the penalty was imposed under an invalid provision, it is appropriate to set out the whole background to the scheme for payment of LFAS.
Regulation 1257/1999
Support for less-favoured areas and areas with environmental restrictions shall contribute to the following objectives.
(a) Compensation for naturally less-favoured areas
to ensure continued agricultural land use and thereby contribute to the maintenance of a viable rural community,
to maintain countryside,
to maintain and promote sustainable farming systems which in particular take account of environmental protection requirements.
(b) Compensation for areas with environmental restrictions
to ensure environmental requirements and safeguard farming in areas with environmental restrictions.
1. Farmers in less-favoured areas may be supported by compensatory allowances.
2. Compensatory allowances shall be granted per hectare of areas used for agriculture to farmers who:
farm a minimum area of land to be defined,
undertake to pursue their farming activity in a less-favoured area for at least five years from the first payment of a compensatory allowance, and
apply usual good farming practices compatible with the need to safeguard the environment and maintain the countryside, in particular by sustainable farming.
Less-favoured areas which are in danger of abandonment of land-use and where the conservation of the countryside is necessary, shall comprise farming areas which are homogeneous from the point of view of natural production conditions and exhibit all of the following characteristics:
the presence of land of poor productivity, difficult cultivation and with a limited potential which cannot be increased except at excessive cost, and which is mainly suitable for extensive livestock farming,
production which results from low productivity of the natural environment which is appreciably lower than the average, with regard to the main indices of economic performance in agriculture,
a low or dwindling population predominantly dependent on agricultural activity, the accelerated decline of which would jeopardise the viability of the area concerned and its continued habitation.
Community support for … less-favoured areas … shall be financed by the EAGGF Guarantee Section throughout the Community.
1. Rural development measures financed by the EAGGF Guidance Section shall form part of the programming for Objective 1 regions according to Regulations (EC) No 1260/1999.
2. Rural development measure other than those referred to in Article 35(1) may form part of the programming for Objective 2 regions in accordance with Regulation (EC) No 1260/1999.
3. Other rural development measures which do not form part of the programming in accordance with paragraphs 1 and 2 shall be subject to rural development programming in accordance with Articles 41 to 44.
4. With reference to appropriate rural development measures, Member States may also submit for approval general framework Regulations which form part of the programming in accordance with paragraphs 1 to 3, as far as it is appropriate with a view to maintaining uniform conditions.
1. Rural development plans shall be drawn up at the geographical level deemed to be most appropriate. They shall be prepared by the competent authorities designated by the Member State and submitted by the Member State to the Commission after competent authorities and organisations have been consulted at the appropriate territorial level.
2. Rural development support measures to be applied in one area shall be integrated, whenever possible, into a single plan. Wherever several plans need to be established, the relationship between measures put forward in such plans shall be indicated and their compatibility and consistency ensured.
Rural development plans shall cover a period of seven years from 1 January 2000.
It shall apply in relation to Community support as from 1 January 2000.”
Commission Regulation (EC) No 1750/1999 laid down detailed rules for the application of Council Regulation (EC) No 1257/1999 and detailed provisions as to the contents of Rural Development Plans. We need not quote from it at length but it may be noted that Article 5, under the heading “Less favoured areas and areas with environmental restrictions” allowed compensatory allowances in relation to areas used by several farmers in common for the purpose of grazing animals to be granted to each farmer in proportion to use, or right of use, of the land.
Council Regulation (EC) No 1258/1999 provided that the European Agricultural Guidance and Guarantee Fund (EAGGF) was to fund, inter alia, rural development measures.
The foregoing regime, amended in relation to relatively minor matters from time to time, remained in place throughout the seven year rural development programme period which had begun on 1 January 2000, in terms of Article 42 above. It was replaced by another trio of Regulations which, with certain exceptions as to detailed provisions relating to LFAS, took effect from 1 January 2007. These were European Council Regulation (EC) No 1698/2005, European Commission Regulation (EC) No 1975/2006 and European Council Regulation (EC) No 1290/2005.
Recital (70) of the preamble to Regulation 1698/2005 makes the nature of the change clear:-
“The new support scheme provided for in this Regulation replaces the existing support scheme. Therefore, Regulation (EC) No 1257/1999 should be repealed from 1 January 2007 with the exception of certain provisions concerning less favoured areas which should be repealed at a later date.”
The excepted provisions were arts 13(a), 14(1), the first two indents of art 14(2), arts 15, 17 to 20, 51(3) and 55(4) and part of Annex 1 of Regulation 1257/1999. These were the LFAS provisions. By art 93 of Regulation 1698/2005 these provisions were to remain in force until 1 January 2010, when they would be repealed subject to an Act of the European Council. We understand from Mr Cameron that such an Act of Council has never been promulgated and that these provisions of the 1999 Regulation therefore remain in force. At all events they were in force in 2009.
Correspondingly, art 94 of Regulation 1698/2005 provided that its own LFAS provisions – being arts 37, 50(2) to (4) and 88(3) – would apply only from 1 January 2010, again subject to an Act of Council. Accordingly they were not in force in 2009 and there is no need to refer in detail to their terms. They were simply the provisions which were to replace the 1999 provisions as from 1 January 2010, subject to the Act of Council being promulgated.
Other provisions of Regulation 1698/2005 are, however, important. Article 1 defines its scope:-
“This Regulation
5) lays down rules on partnership, programming, evaluation, financial management, monitoring and control on the basis of responsibilities shared between the Member States and the Commission.”
These provisions make clear the comprehensive nature of the new regime. The new regime grouped the objectives for rural development under four “axes”, one of which was “improving the environment and the countryside by supporting land management”: art 4. Under that axis, art 36 sets out a number of support measures “targeting the sustainable use of agricultural land through: (i) natural handicap payments to farmers in mountain areas; (ii) payments to farmers in areas with handicaps, other than mountain areas” and four other methods. The specific provisions relating to these two measures are contained in arts 37, 50(2) to (4) and 88(3), referred to above, the provisions whose effect was to be delayed until 1 January 2010.
Article 15 provides that the EAFRD was to act in the Member States through rural development programmes, each programme to run from 1 January 2007 to 31 December 2013.
In terms of its title, Commission Regulation (EC) No 1975/2006 laid down “detailed rules for the implementation of Regulation 1698/2005, as regards the implementation of control procedures as well as cross-compliance in respect of rural development support measures”.
Article 1 states the scope of the Regulation as follows:
“This Regulation lays down the detailed rules for the implementation of the control procedures as well as cross-compliance in respect of the co-financed rural development support measures established pursuant to Regulation (EC) No 1698/2005.”
Article 5(3), which relates to “abuse of right”, is as follows:-
“Without prejudice to specific provisions, no payment shall be made in favour of beneficiaries for whom it is established that they artificially created the conditions required for obtaining such payments with a view to obtaining an advantage contrary to the objectives of the support scheme.”
It is under Article 18 of Regulation 1975/2006 that the penalty was imposed in this case. Under the heading “Reductions and exclusions in the case of non-respect of eligibility criteria”, paragraph (1) of that Article provides:-
“In case any of the commitments attached to the granting of the aid, other than those related to the size of area or number of animals declared, are not respected, the aid claimed shall be reduced or refused.”
Article 37 provided that the Regulation was to enter into force on the seventh day following its publication in the Official Journal of the European Union and that it was to apply to “ Community support concerning the programming period starting on 1 January 2007”.
European Council Regulation (EC) No 1290/2005 replaced the EAGGF with the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD) with effect from 1 January 2007. Of these two funds, it was the EAFRD which was to finance the Community’s contribution to rural development programmes “implemented in accordance with the Community leglislation on support for rural development by the EAFRD”: art 4 of the Regulation. Articles 39 and 40 contain provisions for, in effect, the winding-up of rural development support under the EAGGF as at the end of 2006.
(ii) Domestic
[9] It is not disputed that the domestic regulations in force in respect of LFASS in Scotland in 2009 were what we have referred to as the 2007 Regulations. These were the principal Regulations of 2007 as amended in 2008 and 2009. It was not suggested that the amendments had any direct bearing on the issues before us.
Regulation 5 provides as follows:-
“The Scottish Ministers may pay, on such occasions as they consider fit, in respect of the Scheme Year in question less favoured area support to an appellant who, in the opinion of the Scottish Ministers, actively farms eligible land which is not less than 3 hectares.”
However, of critical importance is Regulation 2(1) which defines “actively farm” as:-
“(a) to undertake a continuous activity which is, in the opinion of the Scottish Ministers, an agricultural activity; and
(b) to undertake that agricultural activity for a period or periods totalling not less than 183 days in the Scheme Year for which payment is to be made.”
Regulation 6 contains lengthy provisions as to what is eligible land in various situations. It is not necessary to set it out at length but paragraph (4) states:-
“Eligible land includes land in respect of which the appellant has a right of use pursuant to arrangements such as short term lets, seasonal grazing and common grazing.”
Regulation 16 is a penalty provision. Under the heading “Withholding or recovery of less favoured area support” it provides.-
“The Scottish Ministers may withhold or recover the whole or any part of any payment of less favoured area support payable or paid to an appellant in any of the following circumstances:-
where, in the opinion of the Scottish Ministers, the appellant has failed to comply with the requirement in regulation 5 to actively farm eligible land.”
As required by the European legislation to which we have referred, Rural Development Programmes have been prepared for Scotland, the current one, covering the period 2007-2013, having been approved by the European Commission on 19 February 2008. LFASS is part of that programme. It is dealt with by the respondents as a rural development measure in terms of Article 36(a)(ii) of Regulation 1698/2005.
Submissions for appellants
[10] Miss Walker opened with the following overview of her case:
The penalties imposed by the respondents had not been validly applied because the relevant European legislation had not been in force at the time of the claim. The appeal should succeed because the respondents had erred in law. Esto penalty provisions were potentially applicable, the facts did not demonstrate a breach of LFASS rules whether under European law, domestic law or domestic policy. More particularly:- the facts neither demonstrated an abuse of European rights on the part of the appellants nor non-compliance with the over-riding principles of LFASS. That was because: (a) the “active farming” requirement in terms of domestic law and guidance imposed no obligation on the appellants personally to carry out day to day farming activities in respect of all of their eligible land provided they ensured the land was “actively farmed”; (b) the appellants had met the principles of LFASS and there were no “public policy” grounds for withholding a decision in favour of the appellants; and (c) the respondents had erred in applying criteria (principally stocking density) according to a method which had not come into force until 2010, which change in methodology did not have retrospective effect and did not consequently have any bearing on a 2009 LFASS claim.
[11] Miss Walker’s first argument – that the European provisions under which the respondents had imposed the penalty had not been in force in 2009 – was one of which proper notice had not been given in the appellants’ pleadings and Mr Cameron took exception to it. However, Miss Walker said it was something that she had only noticed when preparing submissions. The appellants had assumed that the respondents had followed the correct procedures. As Mr Cameron said that he had been able to consider the point over the two days of the hearing and was able respond to it, we need not sustain his objection.
[12] Miss Walker’s submission was that although Regulations 1698/2005 and 1975/2006 had come into force in relation to other things on 1 January 2007, they had not come into force in relation to LFAS at that time. Regulation (EC) 1975/2006 had laid down detailed rules for the implementation of Council Regulation (EC) 1698/2005. Article 1 was important. It laid down the scope of the Regulation. It referred to laying down detailed rules “for the implementation of the control procedures as well as cross-compliance in respect of the co-financed rural development support measures established pursuant to Regulation (EC) No 1698/2005.” LFASS was not a support measure established pursuant on Regulation 1698/2005 because it had long preceded it. The only LFAS scheme which could be said to be pursuant to the Regulation was that contained in the provisions which were not to come into force until 1 January 2010. The respondents had imposed the penalty in this case under Article 18 of Regulation 1975/2006. However, for the reasons just given, Article 18 did not apply to 2009 LFASS claims.
[13] Similarly Article 5(3) of Regulation 1975/2006 had not been in force in relation to LFAS in 2009. Esto it had, it had not been breached: there had been no attempt here at doing anything which was contrary to the objectives of the support scheme.
[14] If we were to find in her favour on these matters, there was no need to go further. The penalty imposed simply fell. If we were against her, however, the facts and the applicable domestic legislation required to be considered.
[15] Miss Walker took us to regs 2(1) and 5 of the 2007 Regulations. The discretion conferred on the respondents in terms of reg 2(1) related to the “agricultural activity” part of the test. But it was not disputed that the grazing of land by livestock was an agricultural activity.
[16] Regulation 16 was the relevant penalty provision in relation to 2009 LFASS, not the European provisions under which the respondents had proceeded. That was clear from reg 16A, introduced by way of 2008 amendment, which referred to the Scottish Ministers publishing guidance from time to time about circumstances in which they would withhold or recover any sums “under Regulation 16”. But even if the respondents had purported to penalise under Reg 16 they would not have been entitled to do so. That was because, among other reasons, the requirement to “actively farm” the land did not include a requirement for personal, day to day, work on the land by the appellant. What was required was that the appellant be responsible for the carrying out of the agricultural activity on the eligible land. That could be achieved by a variety of means, such as shepherding or contract farming or any other arrangement whereby a third party did the day to day work whilst the appellant retained ownership of the stock and ultimate responsibility for them qua owner. More generally, there was nothing in domestic legislation applying European law, nor in guidance notes issued by the respondents, which prohibited the arrangement which the appellants had put in place in relation to their 2009 LFASS.
[17] Miss Walker made extensive reference to the guidance issued by the respondents.
She traced the respondents’ own understanding of the development of LFASS and its relevant rules in terms of Annex 3 to the 2007-2013 Scotland Rural Development Programme, production 24. It acknowledges, at para 5.3.1.2, that the European provisions on payment of LFAS which were in place at the start of that programming period would remain in force until the end of 2009 and narrates that with the consent of the European Commission the Scottish Government was to introduce an interim scheme with limited changes for the period 2007-2009. It says that substantial changes in LFASS regulations were likely to take place with effect from 1 January 2010. It makes clear, under the heading “Scope and actions”, that key features of the interim scheme were to be that it was to be historically based, using data derived from 2006 LFASS payments and that payments would be payable “to the occupier of the land who must be actively farming”.
[18] The Scottish Government Explanatory Note on the 2007 Regulations explained that these Regulations made provision for the implementation of Regs 1698/2005 and 1975/2006 but noted that Reg 1698/2005 preserved until 2010 elements of Reg 1257/1999 applying to LFASS.
[19] Miss Walker also submitted that the appellants’ arrangement did not breach any relevant domestic policy considerations. She set out what the policy was under reference to the respondents’ LFASS 2007-2009 Explanatory Notes and in particular to the following passages:- “Forage means the area of land used for feeding or grazing livestock and may include common grazings … To count as forage, land should be available throughout the year. We may accept other land you claimed as forage in the SAF you submitted for the same year as your LFASS application as long as: the land is available and accessible for your use for maintaining livestock, or producing a forage crop, for at least 7 months starting between 1 January and 31 March in the same year for which you are claiming LFASS; the 7 month period must include 15 May in the year to which your LFASS application relates; the land is close enough to your permanent holding to make its seasonal use viable. We may ask you to show that the land makes a meaningful contribution to your business and that its use, without any payment you might receive because of it, is economically viable. If you lease land (i.e. seasonal let) we will expect you to demonstrate your right to use the leased land, if we ask you to. To be considered actively farming, you must carry out on your land an agricultural activity associated with grazing or feeding farmed livestock. This means livestock kept solely for recreational use, such as horses, do not count as active farming. Where we find that: your land is not being actively farmed … we may reduce or cancel your LFASS payment.”
[20] She submitted that the respondents themselves were bound to have regard to that material. It did not stipulate that the appellant must tend the farmed livestock personally. It was sufficient that the appellant was carrying out an agricultural activity on eligible land. That could be achieved by a shepherding or other arrangement, as already mentioned. It was the active farming of the land – use of the land for agriculture – which was the government’s concern. There was no room, as part of any discretion, for discrimination against those choosing to farm the land by the use of a contractor or other third party.
[21] In relation to stocking density, although a separate stocking density had been calculated annually based upon eligible land and eligible agricultural activity in the previous year, this had been changed by the 2007 Regulations. For 2009, historic stocking density values, calculated in accordance with the 2005 Regulations, were to be used. These values, she said, had no bearing on the issue of active farming.
[22] So far as the facts of this case were concerned, she stressed that the appellants comprised a partnership among four family members. The partnership was an “active farmer” in 2009 and remained so today. It was a large and active farming business and there was no question of “slipper farming”.
[23] So far as the particular arrangement under consideration was concerned, it was unobjectionable for LFASS purposes. The documentation contained no limitation on the right to use the grazings and the fact that LFAS was available to shareholders in common grazings showed that the different ownership of animals, separately identified, on the same land was not necessarily at odds with LFASS rules. In this case the position had been more straightforward because, although more than one farmer had been using the land, only the appellants had applied for LFAS in 2009 and they had done so only on the basis of their own stock. The appellants here had a right of tenancy over the land, so their position was different from, and stronger than, that of common graziers; Crofters Commission v The Scottish Ministers & Anr.
[24] In particular Miss Walker challenged the following findings in Section 4 of the review decision:- “Activity carried out by someone else on eligible land claimed by the appellant does not count towards the appellant’s activity.” “The distance of the field in question from the main farm is 40 miles. This distance, coupled with the situation and type of land (i.e. unfenced areas within much larger fields) mean that, in RPID’s opinion, the seasonal use of the fields in question by the appellant, is an abnormal commercial operation and not consistent with the concept of actively farming land for LFASS.” “Discussions between the RPID local office and the LFASS team in HQ … confirmed that the stocking rates for the field share in question did not represent an eligible activity of the appellant (0.04 LU/HA) and that the field share in question should not have been claimed for LFASS.”
[25] In relation to the first of these, Miss Walker emphasised the fact that risk passed with ownership of the sheep. Deaths had to be made good by the appellants. Economic responsibility lay with the appellants. It was a principle of law in such cases that the farmer could not delegate responsibility for compliance with scheme requirements to anyone else; Barrachander Farm v The Scottish Ministers. Applying that to the facts of this case, the landlords did not become the “active farmers” in place of the appellants. In relation to the second, although the land with which we were concerned might be 40 miles from the appellant’s main holding by road, it was only 22 miles as the crow flies. In relation to the third, stocking density in 2009 was irrelevant. That was because for a 2009 claim stocking density was assessed with reference to historical figures from the appellants’ 2006 claim and on a cumulative basis so far as seasonal land was concerned.
[26] Against that background there was, she contended, no scope for a finding of “abuse of rights” in European law. The case of Emsland-Starke, on which the respondents were relying, had involved fraud. There were no such circumstances here. Secondly, that case had set out a two-fold test which could not be met here:- “A finding of abuse requires, first, a combination of objective circumstances in which, despite formal observance of the conditions laid down by the Community rules, the purpose of the rules has not been achieved. It requires, second, a subjective element consisting in the intention to obtain an advantage from the Community rules by creating artificially the conditions laid down for obtaining it.”
[27] The first part of that test had certainly not been met in this case. It could not be said that the purpose of the rules had not been achieved. The second part did not have the wide application suggested by the respondents in their pleadings. If it had, it would mean that the letting of “naked acres” for SFP purposes would fall foul of Emsland-Starke. What we were dealing with here was a scheme which set out rules which, if complied with, resulted in subsidy being paid. It was the end result that mattered. The critical end result here – the purpose of the rules – was the farming of less favoured areas. Here that had been achieved by the grazing of the appellants’ sheep.
[28] Finally, Miss Walker presented a submission based on personal bar. That was under reference to the appellants’ averments that in or around 2000 the appellants’ agent had sought guidance from one of the respondents’ officials as to whether the arrangements with which this case is concerned were satisfactory for LFASS purposes and had been told that they were. If we were against her on the foregoing arguments, we should hold the respondents personally barred from imposing the penalty. Reference was made to Reid & Blackie at para 2-15, 2-16, 5-13 and 5-14. Although the respondents were a public authority personal bar could apply. R v East Sussex County Council was distinguishable. This was not a case involving a public duty to penalise. There was no legal requirement for the respondents to impose this penalty. It was a matter of the correct interpretation of the legislation and relative guidance. The officer who had given the guidance had interpreted all of that correctly: the respondents had not. The appellants had acted upon the advice given. They had clearly suffered prejudice in terms of the loss of the LFASS payment in respect of their other land.
[29] Mr Cameron set out the legislative context. He explained that the origin of LFASS was in the European Union. Under the Common Agricultural Policy financial support for farmers was provided under two categories; Pillar 1 and Pillar 2. Pillar 1 involved direct payments to producers and included SFP. Pillar 2 addressed social, economic and environmental aims. In Pillar 1 support had been decoupled from production with the introduction of the Single Payment. Pillar 2, amongst other objectives, compensated producers for handicaps they may encounter, in the case of LFASS in the form of the quality of the land they farmed.
[30] There were three relevant European Regulations: 1257/1999, 1698/2005 and 1975/2006. Regulation 1257/1999 underpinned LFASS. It set out the general principles for LFAS in the early years of the last decade. It was not an implementing Regulation and contained no penalty provisions. Regulation 1698/2005 had superseded Regulation 1257/1999. Like its predecessor it was not an implementing Regulation. Recital (33) emphasised the importance of continued use of the land in question for the “handicap” payments with which the Regulation dealt. Regulation 1698/2005 had come into force on 1 January 2007 subject to the foresaid exceptions. Mr Cameron referred to art 1, defining the scope of the Regulation and to art 71(3) which provides that the rules for eligibility of expenditure were to be set at national level. This allowed the competent bodies in each Member State to fix the rules for LFAS. Regulation 1975/2006, by contrast, was an implementing Regulation. It applied to Community support for the programme period starting on 1 January 2007. It was binding in its entirety and directly applicable in Member States. It was this Regulation which provided the legal basis for the penalty imposed by the respondents both in terms of arts 18 and 5(3).
[31] On the second day of the hearing Mr Cameron returned to the question of whether the penalty provisions on which the respondents had proceeded had been in place at the material time, having had the opportunity of considering the matter further overnight. It is convenient to incorporate these later submissions here. Council Regulation 1698/2005 laid down general rules for Community support for rural development financed by the European Agricultural Fund for Rural Development. European Union support for LFASS was paid from the EARDF. As well as what was said to be the critical provision referred to in the following paragraph, reference was made to arts 1, 3, 4, 15, 16, 17, 18 and 19. In Scotland the programme which had been set up under the EARDF was the Scotland Rural Development Programme (SRDP) 2007-2013.It had been approved by the European Commission and was the programme under which payment of LFAS had been made in 2009. The SRDP guidance, production 24,made reference to art 36(a)(ii). It explained, at pages 83 and 84, the rationale and scope of LFAS. It was clear that LFAS, through the SRDP, operated under arts 36(a)(ii) of Regulation 1698/2005. It was one of the support measures covered by that article.
[32] The combined effect of arts 93 and 94 of Reg 1698/2005 was that Reg 1257/1999 was repealed with effect from 1 January 2007. There had been various savings from that repeal set out at art 93(1). Article 94 brought Reg 1698/2005 into force, with the exception of arts 37, 50(2) to (4) and 88(3).It was Mr Cameron’s understanding that the acts of Council required both to repeal the savings from Reg 1257/1999 and bring into force the three articles of Reg 1698/2005 to which we have just referred had never been promulgated. It appeared, therefore, that art 37 of Reg 1698/2005 was not in force. Article 37 was not, however, required for the establishment of the measures referred to in art 36, as set out in the SRDP which was the genesis of the 2007 LFAS provisions. The fact that art 37 was not in force did not alter the proposition that LFAS was a measure provided for in art 36(a)(ii). So LFAS in 2009 had been a payment of a “co-financed rural development support measure established pursuant to Reg (EC) No 1698/2005” in terms of art 1 of Reg 1975/2006.
[33] In Reg 1975/2006 the reference to “rural development support measures” in art 1 was a reference back to art 36 of Reg 1698/2005. Article 1 narrated general principles but art 6(1)(a) of Reg 1975/2006 made clear that Title 1 of that Regulation applied (with certain exceptions which are not relevant here) to, inter alia, support granted in accordance with art 36 of Reg 1698/2005 Article 18 was part of Title 1 of Reg 1975/2006 and was directly applicable as from 1 January 2007. It was, therefore, the correct basis for penalties imposed in 2009 and the correct basis for the penalty in this case.
[34] If that was wrong, it was up to the appellants to specify what they said the basis was for the payment of LFAS as from 2007. If it was the old Reg 1257/1999, that too had been followed by an implementing regulation, European Commission Regulation (EC) No 817/2004. It too contained duties to penalise infringements. Reference was made to arts 66 to 73 and in particular to art 72. Getting the penalty provisions wrong was a matter of form, not substance, and we should not invalidate a penalty because it was ascribed to the wrong provision, provided there was, as here, a power to impose the same penalty under a different provision.
[35] But even if that was wrong, and the respondents had not been entitled to penalise under any of these provisions, that would not vitiate the decision upon which the penalty proceeded; the decision as to whether the appellants had been actively farming. If we were to find that the respondents had exercised their discretion correctly in relation to that matter it would be open to us to uphold their decision and do one of a number of things, including remitting to the respondents to impose a different penalty or imposing a penalty of our own. Mr Cameron agreed that a penalty confined to the proportion of the appellants’ LFAS claim attributable to the 320 ha would be competent. He also confirmed that the need to give European legislation a purposive interpretation was part of his submission. Part of the purpose of the legislation was to penalise the making of an invalid claim.
[36] Mr Cameron then turned to the relevant domestic legislation. He set out the relevant background to the 2007 Regulations. The Less Favoured Area Support Scheme (Scotland) Regulations 2001 had not referred to “active farming”. Instead they had spoken of “eligible agricultural activity” and set out a list of specific eligible activities. The 2005 LFASS Regulations had taken the same approach. “Agriculture” was defined and “eligible agricultural activity” was again defined by reference to certain specified activities. Both sets of regulations contained provisions requiring the continued use of the land in question and the applicant for aid had to give undertakings to that effect.
[37] He said that the 2007 Regulations had introduced the term “actively farms”. In terms of the definition of that term contained in Regulation 2(1), the grazing of sheep was clearly agricultural in nature. The issue here was activity: whether it could be said that the appellants had been actively farming this land. The land had to be actively farmed and it had to be the appellants who were doing the farming.
[38] The major problem was the level of activity. The respondents had come to the view that it was inadequate to be considered active farming. In reaching that conclusion the principal matter which the respondents had taken into account had been stocking density. But it was not the only factor of which account had been taken and the question for the court, given the discretion conferred on the respondents in terms of the definition, was whether the respondents had acted reasonably and fairly in reaching their decision that the appellants had not been actively farming the land.
[39] Apart from the level of activity being carried out another factor upon which the respondents had relied was the fact that it was the landlords who had the care and control of the stock on a day-to-day basis, not the appellants.
[40] Mr Cameron then turned to the guidance provided by the respondents in relation to the LFAS scheme. In Oosterhof and in Ninewells the Court had shown itself to be ambivalent about the relevance of guidance in appeals of this kind. Mr Cameron accepted that guidance was not definitive. But it was of some use. He referred to para 7.1 of the LFASS 2007-2009 Explanatory Notes produced by the respondents’ Rural Payments and Inspections Directorate. It says “To be considered actively farming, you must carry out on your land an agricultural activity associated with grazing or feeding farmed livestock. This means livestock kept solely for recreational use, such as horses, do not count as active farming.” Paragraph 15, dealing with inspections, also emphasised the importance of a certain level of activity being maintained.
[41] In IACS Guidance Notes for 2009 it had been made clear that the rules had changed and that each individual field had to have ongoing LFASS eligible activity. Abandoned and inactive fields no longer qualified. The same point was made in Annex 1 under a heading “Claiming individual land parcels for LFASS 2009” which goes on to say “Note that if we find that there is no activity on land you have claimed for LFASS 2009, or there is evidence of some activity, but levels are so low that they do not represent continued use of agricultural land, EC penalties may apply”. In concluding this section of his submissions, Mr Cameron made reference to production 24, being Annex 3 to the respondents’ 2007-13 Scotland Rural Development Programme, where, at p 86, guidance is given as to how farming activity would be assessed and cross compliance checked. In that section some emphasis is placed on stocking densities. Given all of that, an appellant for LFAS in 2009 could be in no doubt as to the need to maintain a certain level of agricultural activity in each field claimed and of the significance of stocking density as a factor in assessing levels of activity.
[42] Mr Cameron then turned to a public law submission on the effect of discretion. Where a statute conferred a discretion a court should be slow to interfere with the exercise of that discretion. This court did not have a judicial review jurisdiction but appeals to it in terms of the Appeals Regulations were competent on both fact and law. The judicial review authorities were therefore relevant. The judicial review case law showed that judicial review was not excluded where a decision was entrusted, objectively to, for example, a government minister. The use of subjective language in a statute did not operate as a licence to the decision-maker to do as he pleased; Secretary of State for Education and Science v Tameside Metropolitan Burgh Council, per Denning MR in the Court of Appeal at pages 1024D to 1025C and, in the House of Lords, per Lord Wilberforce at page 1047D-Eand Lord Diplock at pages 1064F – 1065B. The case law showed that courts, when exercising a judicial review jurisdiction, would look to see whether a decision-maker had directed himself properly, had taken account of relevant matters and not taken account of irrelevant matters and so forth. But the authorities also showed that if the decision-maker had reached his decision properly the court would stand back and allow the decision-maker some leeway in the exercise of his discretion; R v Monopolies and Mergers Commission per Lord Mustillat page 32C. These public law principles also applied to us in the exercise of our jurisdiction under the Appeal Regulations. We should give the respondents a degree of leeway in their implementation of the 2007 Regulations.
[43] The question for the court was not, therefore, “Were the appellants actively farming?” but “Did the respondents act fairly and properly in reaching their decision?”
[44] In answering that question we should have regard to the nature of the discretion conferred upon the respondents. The following elements were important:- it was a wide discretion; there was no list of criteria or conditions to be met; unless it was found to be irrational the decision must stand; it had been exercised is a way which was reasonable; and account had been taken only of matters which were relevant, notably (a) stocking density, (b) the fact that care and control of the animals rested with the landlords, and (c) the fact that the arrangement seemed to have no commercial purpose, at all events in terms of LFASS.
[45] In the third chapter of his submissions Mr Cameron made reference to further facts which he relied upon as relevant to the respondents’ exercise of their discretion. These were as follows:- that the land in question was 40 miles from the appellants’ main holding; that the precise location of the 320 ha had never been identified; that the number of sheep allocated to each person sharing the grazings had been determined by the proportion of the field let to each tenant which showed that the number of sheep so allocated had not been arrived at on the basis of any agricultural consideration; that all of the care and active management of the sheep was done by the landlords; that it appeared that the appellants were getting no commercial benefit whatsoever from the transaction; that whatever exactly was going on it was an abnormal commercial transaction; that the stocking density was only 0.04 livestock units per hectare; and that another tenant also had sheep allocated to him under a similar arrangement in respect of the same general, undefined, area of ground. Taking all of these facts into account this was a proper, reasonable and fair exercise of the respondents’ discretion. They were entitled to hold that the appellants were not actively farming the eligible land.
[46] In relation to stocking densities, the Court had put forward some comparisons. It was suggested that a density of one ewe to two or even three hectares would not be manifestly too low in some parts of the Highlands. Mr Cameron submitted that the Court should be careful about using such comparators. Much depended upon the quality of the land in question. This might be a matter for evidence and the respondents would be happy to lead evidence in due course. Stocking density was a tool for assessing whether someone was actively farming. Low stocking density sometimes triggered that sort of inquiry. There was no hard and fast rule in relation to stocking densities. The very purpose of a discretion was to allow the respondents to decide each case on its own facts, but stocking density was a factor which the respondents were entitled to consider.
[47] The respondents had also been entitled to have regard to the personal nature of the farming. Whilst a farmer could not avoid certain responsibilities and obligations by delegation (Barrachander) the question of active farming, and who was doing the farming, was different. There may be circumstances in which a farmer could contract out the farming – such as contract farming or shepherding – and still meet the active farming test. The employment of a shepherd was a clear example. In that situation the farmer retained overall management and took the profit or loss of the operation. But who had the care, control and management of the operation on a day-to-day basis was one factor among several which the respondents were entitled to take into account. In the present case it was the landlord who was doing the active farming, if indeed there was active farming at all.
[48] It had been a combination of the foregoing factors which had led the respondents to draw the conclusion that there was no active farming being carried out in this case. In arriving at a decision on how the respondents had exercised their discretion, the proportionality of the penalty imposed was irrelevant.
[49] Mr Cameron then turned to Miss Walker’s submission on personal bar. His first submission was that it was inappropriate for the court to analyse the obligations of a public authority exercising statutory functions from the point of view of private law; Reprotech v East Sussex Council at paras 33-35, Reid & Blackie paras 5-07 to 5-14. Reprotech was highly persuasive in the context of this case.
[50] There was no need to take the court through the law on personal bar: it was as stated in Gatty v MacLaine. The representation being relied upon here appeared to be an alleged representation by an official of the respondents that the arrangement was compliant in terms of the regulations as at 2000 or 2002. He pointed out that the LFAS rules had changed since then but submitted that, quite apart from that, the representation required to found a plea of personal bar had to be a representation as to a state of facts, not opinion; Gatty v MacLaine, Wm Grant & Sons v Glen Catrine Bonded Warehouse Ltd per Lord President Rodger at page 913.
[51] Account should be taken of the fact that from 2000 to 2009 the LFAS landscape had been changing each year. Year by year appellants had to make their claims and give the undertakings applicable to that year. Although not a lot had changed in the period 2001 to 2005 a lot had changed by 2007. That included the introduction of the term “actively farm” into the LFAS lexicon. And in 2009 a claimant had to actively farm each field in respect of which a claim was made. In these circumstances it would not be appropriate to hold the respondents to any expression of opinion given by one of their staff in relation to a particular scheme in the year 2000.
[52] Finally, personal bar could not force a public authority to carry out an act which was ultra vires. If the respondents were right on the question of “actively farming” they could not be forced to pay LFAS on land which was not being actively farmed. Mr Cameron accepted, however, that a valid and effective plea of personal bar could preclude the application of the penalty in so far as it exceeded the amount of LFAS attributable to the 320 has.
[53] The court asked whether the concept of legitimate expectation played any part here but Mr Cameron made the point that it had neither been pled nor argued.
Response for appellants
[54] Miss Walker agreed that Reg 1975/2006 was the implementing regulation for Reg 1698/2005. The former implemented the latter in so far as the latter was in force. But art 37 of Reg 1698/2005 was not in force. The Articles remaining in force from the Reg 1257/1999 governed LFAS in 2009. The appellants had therefore been penalised under a provision which was not in force in relation to LFAS at the material time.
[55] It was not for the appellants to show what the correct penalty provision was; it was for the respondents to show that their decision was properly made. The respondents were arguing that they had been correct in imposing a penalty under Article 18 and in holding that a breach of art 5(3) of Regulation 1975/2006 had taken place. But neither provision had been in force in relation to LFASS in 2009.
[56] Miss Walker sought to reinforce her point by reference to the Appeal Regulations. Neither in Regulation 2(1) nor in the Schedule of Relevant Decisions was there reference to Regulation 1698/2005 or Regulation 1975/2006. This showed that our own legislature had not thought these to be in force. The Appeal Regulations governed decisions made after 20 November 2009 and accordingly applied to the respondents’ decision in this case.
[57] The court need not consider the public law cases referred to by Mr Cameron. Regulation 8 of the Appeal Regulations allowed an appeal on any issue of fact or law. Where there had been a fundamental mistake the only appropriate disposal was to set aside the whole decision.
[58] Mr Cameron had argued that the only question was whether the respondents had acted reasonably in coming to their decision on the question of active farming. But the matter had to be looked at the other way round: one had to decide whether the appellants had been actively farming and if they were the respondents must automatically be acting unreasonably in withholding payment. The respondents must exercise their discretion in a way which was fair and reasonable. Here they had exercised it irrationally.
[59] It had been said that the arrangement here was without commercial purpose, but the payment of SFP and LFAS were legitimate commercial considerations.
[60] As to stocking density, it was more legitimate to look at that across the spread of the appellants’ whole enterprise. But it was not necessary to look at stocking density at all. That was because any activity except, perhaps, something just short of abandoning the land altogether, was sufficient to pass the test.
[61] Miss Walker then embarked upon an argument based on legitimate expectation but Mr Cameron took exception on the basis of lack of notice. We sustained the objection. Quite apart from the absence of any express reliance on such a plea, there was in our view no adequate notice of facts and circumstances capable of founding such a plea.
[62] Miss Walker closed by inviting us to refuse the respondents’ motion for dismissal, quash their decision, order payment of the appellants’ LFAS claim in full and reserve the matters of expenses and interest.
Response for respondents
[63] Mr Cameron made additional submissions on art 37. The Article contained various conditions relevant to the land being less favoured and so on. It replicated the saved provisions from the previous Regulation and it was subservient to art 36. He accepted that the Appeal Regulations made no reference to the European Regulations upon which the respondents had proceeded when imposing the penalty but they did refer, at para 13 of the Schedule, to decisions made under the 2007 domestic Regulations. That covered the respondents’ decision on active farming. The Court therefore had jurisdiction.
[64] Mr Cameron then outlined how common grazings were dealt with under LFAS but it is unnecessary to go into that here.
Whether the relevant European provisions were in force
[65] Article 18 of Reg 1975/2006, the provision under which this penalty was imposed, came into force on 1 January 2007. Article 37, the commencement provision, does not qualify its application in any way. It applies to “Community support concerning the programming period starting on 1 January 2007”. Article 1 sets out the purpose and scope of the Regulation. It was to lay down “the detailed rules for the implementation of the control procedures as well as cross-compliance in respect of the co-financed rural development support measures established pursuant to Regulation (EC) No 1698/2005”.
[66] Although LFAS was a co-financed rural development measure, it is clear that in the strict sense of the term, it was not “established pursuant to Regulation 1698/2005”. It pre-dated that Regulation and the new rules on LFAS contained in the Regulation were not to come into force until 1 January 2010 at the earliest. Accordingly, we accept that there is an obvious force in Ms Walker’s submission that LFASS in 2009 was a scheme which simply was not covered by the provisions of Reg 1975/2006.
[67] However, we think that this approach looks at the matter too narrowly and fails to give arts 1 and 18 the purposive interpretation necessary in the context of working with European legislative provisions. Regulations 1698/2005 and 1975/2006 have to be seen in context. They are, as we have seen, part of a new regime brought in to govern the programming period from 1 January 2007 to 31 December 2013. Another element in that new regime was the change in funding for rural support measures from the European Agricultural Guidance and Guarantee Fund, created under European Council Regulation (EC) No 1258/99, to the European Agricultural Fund for Rural Development set up by European Council Regulation (EC) No 1290/2005. As we understood Miss Walker, she accepted that LFAS was a measure under Axis 2 of the four axes set up by Reg 1698/2005. In any event, it is plainly so. Axis 2 is concerned with “Improving the environment and the countryside” and art 36(a)(ii) makes clear that support under that axis is to concern “measures targeting the sustainable use of agricultural land through payments to farmers in areas with handicaps, other than mountain areas”. (Mountain areas are included a sub-paragraph (i)).
[68] We have seen, above, the comprehensive scope of Reg 1698/2005. It laid down “general rules governing Community support for rural development, financed by the EAFRD” and these rules were to include rules as to “monitoring and control”: art 1. As from 1 January 2007 LFAS payments to Member States came from the EAFRD. It is clear that the intention was that LFAS, in common with all other rural development support measures financed by the EAFRD, was to be subject to this new regime from 1 January 2007. There is nothing in any of the Regulations we have looked at which delays the application of Reg 1698/2005 to LFAS per se. Implementation of the new LFAS rules contained in art 37 and the other excepted provisions was certainly delayed until at least 1 January 2010 but not the application of the Regulation to the existing LFASS. It seems clear that, as from 1 January 2007 the 1999 LFAS rules as to eligibility continued to apply but the scheme itself was subject to the regime introduced by Reg 1698/2005 and, as a consequence, Reg 1975/2006. It was repositioned so as to come under Axis 2 and art 36, it was financed from a different source and the rules which were to govern these new arrangements, in terms of monitoring and control, were, we have no doubt, intended to apply to it with immediate effect.
[69] Whilst it may not be possible to say, therefore, that LFAS in 2009 was “established” pursuant to Reg 1698/2005 it was certainly re-positioned and rebased by that Regulation and we are satisfied that a proper understanding of what was happening in regard to rural development support measures in the European Union at that point requires us to read the Regulation as applicable to LFAS as from 1 January 2007. We are therefore satisfied that art 18 of Regulation 1975/2006 applied at the date of the penalty appealed against. It may be noted, for completeness, that the Scottish Parliament regarded Regs 1698/2005 and 1975/2006 as being in force for the purposes of LFAS when it enacted the 2007 Regulations: reg 2(1) refers to both of these.
[70] Eligibility for expenditure of the EAFRD contribution from 1 January 2007 onwards was governed by art 71 of Reg 1698/2005, para 3 of which states: “the rules on eligibility of expenditure shall be set at national level, subject to the special conditions laid down by this Regulation for certain rural development measures”. This is the European provision which entitled Member States, and competent authorities within Member States, to set the criteria for the various rural support measures co-funded from the EAFRD. It was under this provision that LFAS criteria contained in the 2007 Regulations were enacted.
[71] As will be seen, we have concluded that the decision of the Ministers cannot stand and our conclusion on the proper construction of these provisions is not necessary for determination of the present case. However, before departing from the question of the proper basis of any penalty, it is appropriate to deal with the position if Reg 1698/2005 and 1975/2006 were not applicable in relation to LFAS in 2009. At a European level, the provisions of Commission Regulation (EC) No 817/2004, laying down detailed rules for the application of Council Regulation (EC) No 1257/1999, would continue to apply. This Regulation was touched on by Mr Cameron in submissions. It was not dealt with fully before us but we note that art 71(2) provides that:- “In the event of undue payment, the beneficiary under a rural development measure shall be under an obligation to repay the amount concerned in accordance with art 49 of Reg (EC) No 2419/2001.” Article 72 sets out penalties in respect of false declarations made as a result of serious negligence or intentionally. These are to apply “without prejudice to additional penalties provided for under national rules”. The 2007 Regulations did, of course, contain a penalty provision. That was reg 16. As we have seen, it entitled the Scottish Ministers to withhold the whole or any part of an LFAS payment where, in their opinion, the appellant had failed to comply with the requirement to farm eligible land.
[72] Thus, even absent Regs 1698/2005 and 1975/2006, there was legislative underpinning, both at a European level and domestically, for the imposition of a penalty such as was imposed here. Whatever may be the position otherwise, in the context of having to apply a regime of European rules purposively, we agree with Mr Cameron that imposing the penalty under the wrong provision, where there was a proper basis for it elsewhere, is not in itself fatal. If we had been satisfied that there was a sound substantive basis for penalty, then, even if we had sustained Miss Walker’s first submission, we would have felt it appropriate to apply the proper penalty provision where that could be clearly identified.
Whether the respondents exercised their discretion properly on the question of active farming
[73] Although Miss Walker stressed as an aspect of the background that the appellants were plainly active farmers, both sides appeared to proceed on the view that it was proper for Ministers to base their decision by reference to the activities at Kirkhope, rather than by having regard to the appellants’ whole farming activities or to their stocking densities taken as a whole. We have accepted that as the proper approach to be taken in this case. As we have seen, Mr Cameron suggested, in relation to personal bar, that this was a change under the 2007 Regulations. For present purposes, we see no reason to question this. It is referred to in the supporting guidance. It is enough to observe that it is not a change which is spelled out with any clarity in the Regulations themselves.
[74] It is not for us to comment on the legislative approach illustrated by the relevant provisions under which important matters with penal consequences depend on the discretionary decision of Ministers. No doubt a prudent farmer would try to avoid any problem by seeking explicit written approval of his plans in advance and there may be issues where a discretionary assessment makes practical sense. An example might be assessment of forage areas in heavy gorse or bracken. However, we think that penalties based on discretion should be avoided, if possible. That, however, is a matter for Parliament.
[75] The 2007 Regulations might appear to confer a discretion on the respondents at two levels. Firstly, as to whether an appellant is actively farming in terms of reg 5 and, secondly, as part of answering the first question, whether the activity being undertaken is an agricultural activity in terms of reg 2(1)(a). We have no doubt that the respondents laid great stress on the first, treating it as a separate test. As will be seen, we think this was an erroneous approach.
[76] The initial decision letter of 17 January 2011 stressed that :” To qualify for LFASS payment, each eligible field must be actively farmed by the applicant. (original emphasis) … To be considered actively farming the applicant must himself carry out the farming activity”. The main emphasis was on the importance of farming “by you”. We understood Mr Cameron to agree that insofar as this emphasis suggested a need for direct physical involvement it was misplaced. A person can be said to carry out agricultural activity through the means of an employee, agent or contractor. There was no essential reason why the owner of stock could not be said to be engaged in agriculture merely because physical care of the stock was entrusted to another person. He, of course, relied on a variety of other factors as pointing away from active involvement by the appellants.
[77] Although the letter did mention the definition there was nothing in it to suggest that the Ministers’ focus was on the terms of the definition rather than on the primary term “active farming”. That this was indeed their focus is plain from the terms of the Review Report of 31 May 2011. This appeal is, of course, from the decision expressed in that Report. In the Report – at section (3)(c) - the Ministers purport to set out the requirements of the scheme. “These include the need to actively farm eligible land”. There was no mention of the definition in reg 2. The lengthy narrative of facts relied upon to demonstrate that the requirement had not been met made no attempt to consider the definition. Indeed, the opening paragraph points clearly to an approach which did not rely on the definition. “The LFASS regulations allow Scottish Ministers to pay LFASS to an applicant who actively farms eligible land. They rest the determination of what constitutes active farming on the opinion of Scottish Ministers”. But the Regulations do not rest that issue on any such opinion of the Ministers. They provide an explicit definition. The reasons show no awareness of this. The first sentence in the second paragraph reads: “To qualify for payment of LFASS the applicant must himself actively farm eligible land”. The paragraph goes on to say : “This would generally mean…” We think it fair to read that first sentence as setting out the test the Ministers applied and that they applied the subsequent criteria to that test instead of, or in any event, in addition to, the statutory test set out by the definition in reg 2.
[78] We have come to the view that if the issue before the Scottish Ministers had, indeed, required a direct assessment of the question of whether the appellants’ operations amounted to “active farming”, the Ministers had material which could well have justified the conclusion they reached. However, we are satisfied that that was not the issue before them. The expression “actively farm” was subject to an explicit definition in terms of the reg 2(1). It may be noted, for completeness, that the definition was in two parts but the second, (b), does not appear to raise any relevant issues. It required the appellant to undertake the agricultural activity for not less than 183 days in the Scheme year. A similar requirement had appeared in the earlier Regulations. Our concern and subsequent discussion is based on the first part of the definition: that is, reg 2 (1)(a).
[79] It is trite law that if the meaning of a word is defined in a statutory context, that meaning, though it may exclude the ordinary meaning, must be taken, unless the context plainly shows that this was not intended: Gloag and Henderson 1.37. Accordingly, reg 5 falls to be applied as if it provided for the Scottish Ministers to pay LFAS to an appellant who, in their opinion, undertook “a continuous activity which is, in the opinion of the Scottish Ministers an agricultural activity”. There is nothing in the context to show that the term was used in reg 5 in a way which was not intended to be covered by the definition. To put the matter shortly, the effect of the definition is to exclude reference to any independent concept of “active farming”. There is no scope for applying any such test either in addition to, or as part of, the definition in reg 2.
[80] In the submissions before us there was no explicit attempt on behalf of the respondents to take issue with the continuous nature of the operation at Kirkhope nor to suggest that the grazing of sheep was not an agricultural activity. As can be seen – perhaps most sharply focused in the submissions referred to above at paras 37, 38 and 43 – the respondents approached the case on the basis that they had to exercise a discretion to determine whether the appellants could be said to be actively farming the land. They addressed this explicitly. They did so by reference to the level of the appellants’ own direct involvement in the activities and concluded that this did not show that the appellants had been actively farming. There was nothing in their written statement of reasons of 31 May 2011 following the Review hearing to show that they had ever considered the matter simply in terms of the statutory test. Put shortly, it seems clear that they accepted that there was a continuous agricultural activity. They did not address the direct question of whether that agricultural activity was undertaken by the appellants. They looked instead at the question of whether the appellants were “actively farming”.
[81] We are satisfied that that question of whether the applicants were “actively farming” had been entirely superseded and replaced by the definition. Accordingly it is clear that by considering matters as dependent upon their view of “active farming” they were asking themselves the wrong question. Their answer cannot stand as the basis for the decision to impose a penalty.
[82] In terms of reg 9 of the 2009 Appeal Regs we have power to alter the decision or substitute any decision we consider appropriate. Although Mr Cameron suggested that it would be competent for us to remit the matter back to the Ministers, the Appeal Regulations make no provision for this. We consider that the intention is clearly that we should deal with all the issues which follow our decision. Where a penalty has been imposed on grounds which cannot be supported, it may be thought that the usual result should be that the decision simply be set aside. However, we are satisfied that a purposive approach should be taken to decisions relating to the machinery for subsidies and aid under EU Regulations. As discussed above, for example, we are satisfied that an error in identification of the correct penalty provision would be capable of being corrected by substitution of reference to other appropriate provisions. Difficult issues may arise where the question is the substantive one of whether or not the circumstances require us to take notice of a breach and impose a penalty.
[83] We are satisfied that essentially this requires the exercise of our discretion under reg 9. We consider that the proper approach for us is to quash the initial finding and only to substitute a further finding, and penalty, if we are satisfied that this is clearly appropriate. We should seek to avoid “letting an appellant off on a technicality” but that does not require us to approach the matter by considering whether we are satisfied that there should be no penalty.
[84] We are satisfied that we should not routinely give the respondents a second bite at the cherry by inviting further submissions. We must aim to determine appeals by reference to material properly before us if possible although it would always be important to ensure that an appellant had had an opportunity to draw all relevant matters to our attention before we substituted a fresh penalty.
[85] The present case turns on the proper construction of reg 5 in light of the definition at reg 2(1)(a). As we have noted, there was little discussion before us suggesting any need for doubt on the issue of whether the operations represented a continuous activity and we see no need to give any further consideration to that matter. As it seems to us the real issue turns on the comparison between the two related concepts of “active farming” on the one hand and “undertaking an agricultural activity” on the other. They are plainly closely related. The same facts and circumstances would have to be examined in relation to each. They might, in some contexts, be seen as having the same meaning: if you are carrying on a farming activity it would not be difficult to say that you were actively farming. However, we think the context is important. The Ministers plainly regarded the emphasis on “active” as a new concept. It was presumably introduced to import some more direct involvement than might have been involved in the simple concept of carrying on an agricultural activity. They addressed it as something new and different.
[86] We have some awareness of the problems faced by the EU authorities in trying to identify and define the concept of “active farming” in the context of proposals for reform of the Single Payment Scheme. These problems have no direct relevance to construction of Regulations relating to LFASS. There is no doubt that the appellants are active farmers on any view of that expression. The issue before us relates to a small part of their agricultural operations which was to be considered on its own .
[87] We do not pretend to have grasped the full detail and significance of the financial arrangements in place between the appellants and the landowner. At the hearing it seemed to be accepted that the underlying purpose was to secure the appellants’ rights under the SPS and that they would not get a positive benefit from their LFAS because they were in some way obliged to return it to the landowner as compensation for his having lost the opportunity to claim LFAS in respect of the land in question. However, that could not have been the purpose in 2001 and the assertion of the appellants is that they operated essentially the same scheme throughout. This is discussed below in relation to the plea of personal bar. It is probably sufficient to note that it has never been suggested that there was any element of fraud or deception designed to produce a payment of LFAS which could not otherwise have been claimed by someone based on the same level of activity on the same land.
[88] In that connection it may be added that although the low stocking density was relied on as a factor tending to indicate that the appellants were not “actively” involved, it was not suggested that it was at such a level as to prevent the grazing being viewed as an agricultural activity. As we understood matters, the stocking had continued at the level of previous years. The earlier Regulations made provision for adjustment of payment to reflect the low stocking: reg 6 of the 2005 Regulations. These provisions were continued in effect by reg 6 of the amended Regulations in force in 2009. Mr Cameron urged us not to rely on our own experience of stocking levels. The respondents were prepared to lead evidence to show that the stocking was indeed much below the carrying capacity of the land in question. But even if we assume that to be the case, we are not persuaded that the levels were so low as to be illusory. We are satisfied that what was being done on the land was properly described as agricultural activity. The question now is whether we are satisfied that it was not properly described as an activity undertaken by the appellants.
[89] It was not disputed that that the appellants had acquired a right to use the land. It was not disputed that there was a valid contract for sale to them of 80 identified sheep. Their sheep were grazing the land. It is true that the task of looking after the sheep had been left to the landowner. But the appellants had legal responsibility for their welfare and ran a risk of loss if any did not survive. In short, the appellants had entered an arrangement whereby their stock was grazing on what was accepted as being effectively their land. We are satisfied that this can properly be described as undertaking an agricultural activity.
[90] We recognise that there were a number of unusual features. The arrangement could not be described as a routine agricultural operation. In terms of operational income and expenditure it is clear that the appellants would inevitably make a commercial loss after payment of rent and were at risk of further loss if the sheep did not all survive the duration of the lease. The material presented to us suggested that they would make no profit from LFAS as they had paid it over to the landlord. The purpose of the arrangement appeared to be to allow them to obtain payment from all their SFP entitlements and the landowner to continue to get the benefit of LFAS. However, as we have noted, that could not have been the purpose in 2001 and we are not satisfied that we had a clear understanding of the financial arrangements as they worked in practice between the appellants and the landowners. Our attempts to seek clarification were not entirely successful but we took the view that if the financial implications went further than were disclosed by the written agreements it was for the respondents to show their significance. We have proceeded on the basis of the agreements. It is also clear that the appellants had little or no direct involvement with their animals. However, as discussed in Barrachander, arrangements where farmers entrust the full care of their stock to a third party are common in Scotland under the heading of “wintering” or “agistment”. As that case makes clear, the owners retain responsibility for the sheep even when another party attends to the physical arrangements for their care. The respondents refer to the distance of the seasonal land from the main holding but much greater distances are routinely involved in wintering arrangements. Although 40 miles would create some difficulties for stock supervision if this was being carried out from a base at the main holding, this would not be impossible. But we think that the distance is irrelevant when it was freely accepted that a third party was responsible for day to day care. We do not think these factors detract from the fact that putting in place arrangements whereby your stock grazes land over which you have obtained grazing rights is properly to be seen as undertaking an agricultural activity. There was, in short, no obvious breach of reg 5.
[91] When considering proper disposal of the appeal, we take some comfort from the previous history. It appears that the appellants had received payment of LFAS in the years preceding 2009. Although we recognised that that fact does not, of itself, establish that there was compliance, the respondents have not challenged these payments. This tends to suggest that, whatever the position relative to the Domestic Regulations the arrangements which the appellants had in place were not incompatible with the underlying EU schemes for payment of LFAS. These had not changed in the relevant period. But we think that it can also be said, when the significance of the definition is kept in mind, there was no radical difference between the 2001 or 2005 Regulations and the 2009 Regulations, insofar as the conduct of agricultural activities were concerned. As we have seen, the test in 2009 was whether the appellants were undertaking a continuous activity which was, in the opinion of the Scottish Ministers, an agricultural activity. One difference was that under the earlier provisions the question of what was, or was not, an agricultural activity was not left to the discretion of Ministers but was defined. It included maintaining a flock of sheep comprising females over 1 year old by 15 May. That in essence was what the appellants were doing in 2009. It was not suggested that such activity had ceased to be regarded as a relevant agricultural activity. Accordingly, the fact that the respondents apparently saw no need to penalise the appellants in previous years, tends to support our view that there is no justification for us now imposing any penalty for 2009.
[92] But, in any event, we are not persuaded that there is any requirement for us to substitute a finding that the appellants’ operations were a breach of the relevant provisions.
[93] It is clear that the whole arrangement was set up to take advantage of available subsidies and not for any direct commercial benefit. As it was an artificial scheme in that sense, it might be thought that if any penalty was to be imposed it would be likely to be one based on abuse of right. The respondents suggested that it might be necessary to lead further evidence to show that there was an abuse. However, we were hearing an appeal. If the respondents did wish to show that the arrangement was an abuse they should have disclosed their material at a much earlier stage. Although we have indicated our lack of complete understanding of the implications of the scheme in respect of the subsidies derived from it, the respondents did not make any attempt to demonstrate any hidden abuse. In this case we are satisfied that we should proceed on the basis of the material before us.
[94] In the last paragraph of section 4 of the Review Report, the respondents made reference to art 5(3) of Reg 1975/2006. Mr Cameron did not make a great deal of this in his submissions but reference was made to the more general concept of “abuse of right” as part of the European jurisprudence. This concept was discussed in the Emsland-Starke case and the important dictum is found at para [52]: “A finding of abuse requires, first, a combination of objective circumstances in which, despite formal observance of the conditions laid down by the Community rules, the purpose of these rules has not been achieved”. The relevant provisions of art 5(3) seem to do little more than reflect this: “no payment shall be made in favour of beneficiaries for whom it is established that they artificially created the conditions required for obtaining an advantage contrary to the objectives of the support scheme”. We need not consider the question of whether that article applied to LFASS in 2009. We are entirely satisfied that the Review Report gave adequate intimation of the intention to challenge the payment as an abuse and that it is appropriate for us to give full consideration to that concept and apply it as appropriate. Essentially, the question we have to address is whether the arrangement in the present case led to a payment contrary to the purpose of the scheme.
[95] Although the arrangement was an artificial one in the sense that it was one contrived with no commercial purpose other than to obtain the benefit of the available subsidies, it is important to recognise that farming in reliance on subsidies is a perfectly legitimate activity. The intention underlying the whole arrangements in question can properly be described as being to comply with the conditions necessary to qualify for subsidy. There was no potential commercial gain from the arrangement other than from the subsidies involved. But many farm businesses would not be commercially viable without subsidy. The fact that this may have been a somewhat extreme example is not, of itself, indicative of any abuse. All sensible farmers can be expected to arrange their farming activities so as to maximise their total income from sales and subsidies. If there are circumstances which allow them to maximise that income by relying entirely on the subsidy element, that is normally just an aspect of business judgment.
[96] It seems clear that the critical issue is whether there is enough material to show that the arrangement was contrary to the objectives of the LFASS and we do not think there is. We have already described the purposes of the scheme. In terms of art 13 of Reg 1257/1999, the main aim of the scheme can be seen to relate to positive agricultural use of land. This was to be with the aim of contributing to maintenance of a viable rural community. In essence we think that must mean no more than providing employment. Plainly sheep need some care. On any view, use of the land for grazing sheep even at apparently low stocking rates, is consistent with the aim of the scheme. The particular arrangement whereby subsidy was paid in respect of this use of land does not detract from the purpose. The land was eligible land. The use of land for grazing animals was at the heart of the scheme. It appears that the landowner would have been entitled to claim LFAS on the land if it had been his own sheep which were grazing. The fact that the payment went to the appellants does not demonstrate any failure in the purpose of the scheme.
[97] Put shortly, we are not satisfied that there is any justification, in the circumstances disclosed, for us now making a finding that there has been any abuse of right.
[98] In the circumstances it is unnecessary for the appellants to rely on their plea of personal bar. However, we heard full submissions and it is appropriate to deal briefly with this issue and to make clear our view that we should follow the approach of the House of Lords and refuse to hear pleas based on bar in circumstances where a plea based on the related concept of “legitimate expectation” would be more appropriate.
[99] The averments in favour of personal bar are far from specific. It is said that Mr Gourlay sought guidance from RPID (then SEERAD) in around 2000 in respect of “the particular arrangements relevant to this appeal” and that he was advised by telephone that the arrangements were satisfactory for the purpose of the appellant making claims under LFASS. Under the heading of “Arguments to be advanced in support of the appeal” it is also said that the appellants’ agent relied upon advice provided by the Respondent in 2000 in order to make a claim under LFASS in 2001 – 2009 inclusive. It was asserted that there was no substantive change in domestic rules applicable to LFASS during the intervening period to prevent the appellants making the claim in accordance with the same arrangements in 2009. It was contended that in such circumstances the Respondents were personally barred from asserting that the arrangements the appellants entered into in respect of Kirkhope were contrary to the objectives and scheme criteria of LFASS.
[100] The respondents challenged the relevancy of these averments on various grounds. First of all it was said that the law of personal bar did not apply to public authorities. In that respect it appears to us that the case of R (Reprotech Ltd) v East Sussex County Council is a watershed in the development of the law in this area. The passage from the speech of Lord Hoffman (at paragraphs 33 to 35) referred to by Mr Cameron narrates the difficulty which had been experienced in previous English cases in applying principles of estoppel to cases involving public authorities and the development of notions of legitimate expectation as being a more satisfactory means of dealing with situations in which it was being said that public authorities were barred from taking a particular course of action because of earlier representations made by them or on their behalf. Although no Scottish authority was cited on the point, Lord Mackay of Clashfern (at para 6) said this: “I would … wish expressly to agree [with Lord Hoffman] that where public authorities are fulfilling statutory duties or exercising statutory discretions, the public interest in their activities and the effect on members of the public who are not parties to the particular process which the authority is conducting requires the law to differentiate clearly between such activities and those in which interests only of those directly involved must be considered. I therefore respectfully agree with Lord Hoffman that the time has come for the public law in this area to stand upon its own two feet. If it does so, I believe greater clarity will result than if it is treated as standing upon some less discrete basis.”
[101] We consider that it is appropriate to take a similar approach in Scotland. The respondents are a public authority and there is a public interest in ensuring that public funds are not misused or misapplied. In relation to funds administered by the EU it is an important consideration that a failure by Scottish Ministers to apply the European Regulations correctly could lead to substantial penalties imposed on the Government and, hence, the taxpayer. We are accordingly satisfied that a plea based on the type of situation hinted at by the appellants’ pleadings ought to be advanced under reference to the concept of legitimate expectation and that a plea of personal bar should not be admitted.
[102] But, in any event, we consider that the plea of personal bar founders on the reference to the Regulations being “substantially unchanged”. We have discussed above the fact that the Regulations had been changed in relation to the very matter in issue. The test of “active farming”, however defined, had not appeared in the Regulations extant when Mr Gourlay had his discussion. New guidance was issued by the Ministers in relation to the new Regulations. Further, from 2008 the requirements appeared to place greater emphasis on individual parcels of land. Any assurance based on the appellants’ overall operations could not properly be relied on when the focus shifted to individual parcels of land. Whatever the detail of the change, it is clear that Mr Gourlay must have relied on his own judgement or advice from third parties in concluding that the effect of the new provisions was the same as the old.
[103] More broadly, it can be said that we consider that it is up to claimants to satisfy themselves of the requirements of the legislation. There may be circumstances where they are entitled to rely on the terms of explicit written guidance. But it will be rare to be able to rely on advice given informally in course of a conversation. Any claimant must be expected to realise that the requirements are complex and that individual officers cannot be expected to give authoritative rulings in the course of informal conversations. If formal guidance is required it should be sought in writing. It will then be up to the Department to decide whether such guidance can be given. The Department may well feel that it is inappropriate to go further than refer to the formal Regulations and any written guidance they have issued but if they do provide specific advice, there would be an expectation that they would act on it as far as it goes. Where Ministers issue new guidance it is up to claimants to satisfy themselves about the validity of their claims in light of that revised guidance. In short, we would not expect to sustain a plea based on personal bar or legitimate expectation except in very clear circumstances. It will not be easy to establish that informal guidance in a telephone call or other conversation is intended to be relied upon as superseding or qualifying written material. We would not expect the type of general assurance implicit in the appellants’ averments to be capable of being the basis for any genuine reliance.
[104] We did not permit the matter to be argued as one of legitimate expectation as no intimation of any such argument had been given. But we also had in mind the very limited averments of fact on which the appellants would have had to base any such case. Although the test in relation to a case based on legitimate expectation would require some differences in approach, we would not have expected the appellants to have had any real likelihood of establishing such a case on the basis of the limited exchanges disclosed by the pleadings in this case. We do not require to discuss all the requirements of a plea based on legitimate expectation but we have no doubt that, like cases of personal bar, such a plea would inevitably require close examination of specific facts and circumstances. In such cases, we would expect parties to spell out the factual basis of their case very clearly. The vagueness of the pleadings in the present case is indicative of a discussion in fairly broad terms. If there had been a written exchange this would, no doubt, have been expressly averred and founded on. We are satisfied that a plea based on legitimate expectation would have to be supported by the clearest possible averments of detail.
[105] For the reasons set out above we are satisfied that the Scottish Ministers based their decision on an erroneous approach to the provisions of reg 5. They did not give proper weight to the effect of the definition in reg 2. Their decision must be set aside. We have found no justification for imposing an alternative penalty. Accordingly, the appellants ought to receive their LFAS for 2009. As the appellants requested, we continue the cause for submissions in relation to interest, if that cannot be agreed.
[106] We have followed our usual practice of inviting written motions and submissions on expenses. It may be appropriate to deal with expenses in the other related cases at the same time.
For the Appellants: Heather Walker, Solicitor; Turcan Connell, Edinburgh
For the Respondents: Donald Cameron, Advocate; Scottish Government Legal Directorate