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Jean-Yves Gilg

Editor, Solicitors Journal

Update: agriculture

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Update: agriculture

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James Falkner and Amanda Tagg review recent cases involving agricultural estates, liability for economic and indirect loss, and compensation for loss arising from culling

This year a number of cases have been brought by farmers against the establishment. Sadly for those concerned without a great deal of success. However, before considering these we have the House of Lords decision in Thorner v Majors [2009] UKHL 18 (Solicitors Journal 153/12, 31 March 2009).

Proprietary estoppel and agricultural estates

The House of Lords decision in Thorner is not about agricultural law but proprietary estoppel, a doctrine that can equally strike (or not) at commercial or residential property interests. Nevertheless, there is some relevance that it involves a farm and, in the words of Lord Walker, 'two countrymen leading lives that it may be difficult for many city-dwellers to imagine '“ taciturn and undemonstrative men committed to a life of hard and unrelenting physical work, by day and sometimes by night '¦ largely unrelieved by recreation or female company'.

David claimed that he had been given sufficient assurances by his uncle Peter that he would inherit Peter's farm. He relied on these assurances and dedicated a large part of his life to Peter and working on his farm for no wages to the exclusion of other opportunities. As a result, David said, he was entitled to the farm by proprietary estoppel when Peter died without leaving a will.

The House of Lords decided in David's favour against Peter's estate. In doing so, the House of Lords made these points on the quality of the assurances necessary to establish proprietary estoppel:

  • The question was whether Peter's words or acts would reasonably have conveyed to David an assurance that he would inherit the farm that he could rely on.
  • Although much of what Peter said or did that was relied on amounted to oblique comments (such as: 'That's [an insurance policy] for my death duties') rather than a clear statement David would be left the farm, this did not matter in the factual context of these particular individuals; their normal manner, lifestyle and means of communicating.
  • Lack of evidence that Peter had actually intended David to rely on what he did or said was not relevant. It was the reasonable effect of his actions or statements on David that mattered.

This is in contrast to the House of Lords decision in Yeomans Row v Cobbe [2008] UKHL 55, (Solicitors Journal 152/31, 5 August 2008) where the property owner reneged on clear promises. Here, a non-binding arrangement was held not to give rise to an estoppel, partly because the owner and particularly the developer were sophisticated dealers in property who knew their agreement was not binding and a formal contract would be required to make it so.

The circumstances of both cases were unusual. In other cases, whether or not it will be reasonable for words or actions to amount to assurances which can be relied in place of a binding contract or valid will must depend on the individual facts and context. However, Thorner does suggest this might be more likely to occur in an agricultural or family situation.

Tortious liability in cases of economic and indirect loss

The judgment in D Pride & Partners & ors v Institute for Animal Health & ors [2009] EWHC 685 (QB) is another case which, while not about agricultural law, is relevant to farmers. The decision examines the limits of tortious liability in cases of indirect or economic loss.

Following the outbreak of foot and mouth disease in 2007 in the vicinity of the Pirbright Facility in Surrey, the government introduced measures to prevent the spread of the virus; including the culling of livestock infected with the virus, or suspected of having been exposed to it. In addition, restrictions were imposed on the movement of livestock and related products across Great Britain.

Fourteen livestock farmers brought claims in negligence, nuisance and tortious liability under the rule in Rylands v Fletcher for loss suffered in connection with the outbreak. The first seven claimants were farmers whose animals had been culled. The remainder had not been required to cull any of their animals, but had suffered loss as a result of the movement restrictions imposed by Defra.

The claims were brought against the publicly funded Institute for Animal Health and Merial, a private company, both of which were carrying out work relating to foot and mouth disease at the Pirbright facility and also against Defra, which had licensed the work of the first two defendants.

Having reached a settlement with the first seven claimants, the defendants made applications for the remaining claims to be struck out or, alternatively, for summary judgment, on the basis that the claims had no real prospect of succeeding.

The losses suffered by the remaining claimants arose from the restrictions imposed on the movement of livestock following the outbreak of foot and mouth disease. Because they were unable to move animals for sale or export, the claimants had incurred costs in having to keep the animals for longer. In addition, some of the animals had lost value by the time it was possible to sell them because they had passed the point of prime condition for sale.

The defendants argued that the losses sustained by the claimants were either pure economic losses, or indirect losses which had resulted from the imposition of government measures rather than directly from the escape of foot and mouth disease from the Pirbright facility.

The judge agreed that the remaining claimants had no real prospect of succeeding on any of their claims and allowed the defendants' application. In reaching his decision he applied the so-called 'exclusionary rule' which restricts recovery under the law of tort for loss which does not arise from direct physical injury.

It was accepted as possible that some of the remaining claimants might have suffered physical injury in that because they were unable to bring their livestock to the market at the optimum time, those livestock had in some cases suffered loss of condition and were, as a result, less valuable. In the context of agricultural produce and animals timing is everything. Whether it is growing arable crops, finishing beef cattle or fattening lambs, they all have an optimum time for harvest or sale. Missing that date in the case of animals through movement restrictions will mean the value of that livestock will suffer. To add insult to injury, while the value of the animals diminishes during the restrictions, the farmers' costs continue to be incurred in terms of feed stocks and husbandry. However, any physical injury which had been suffered by the remaining complainants was indirect. It had resulted from the government measures imposed following the outbreak of foot and mouth disease rather than from the outbreak itself. In addition, all of the other losses for which the claimants were seeking compensation comprised pure economic loss.

Finally, the judge considered that there was no claim for nuisance since it was the government restrictions which had interfered with the claimants' land and not the outbreak of the disease. He commented in addition that the exclusionary rule applies to nuisance in the same way as it applied to negligence so that if losses were irrecoverable in negligence the claimants could not recover them by reframing the claim in nuisance.

Compensation for loss arising from culling

In R (on the application of Partridge Farms Limited) v The Secretary of State for Environment, Food and Rural Affairs [2009] EWCA 284, the Court of Appeal was required to consider another claim relating to loss arising from the culling of diseased cattle '“ in this instance for bovine tuberculosis.

Eight of the claimant's pedigree cows were culled, pursuant to s.32 of the Animal Health Act 1981, having reacted to tests for tuberculosis. The claimant received statutory compensation of just over £1,000 for each animal. The amount of compensation was determined in accordance with the Cattle Compensation (England) Order 2006 (SI 2006/268) which was made under the 1981 Act to specify the terms on which farmers would be compensated for animals slaughtered in connection with tuberculosis and certain other diseases. Under the provisions of the Order, slaughtered cattle are allocated to one of 47 different categories of cattle and the farmer of those cattle is entitled to compensation based on the average market value, when healthy, of that category of cattle.

The amount of compensation received by the claimant was, however, only about one third of the actual market value of the claimant's cows when healthy. The claimant argued that the 2006 Order was discriminatory and therefore unlawful. While a farmer with livestock of above average quality for a particular category could receive compensation considerably below the healthy market value of his animals, as had happened to the claimant, a farmer with low quality livestock within the same category could be awarded significantly more than the healthy market value.

At first instance the judge concluded that the main, underlying principle of the Order was to procure that farmers received compensation according to the healthy market value of their culled animals. While in most instances valuations carried out in accordance with the Order were reasonably close to the healthy open market valuation, this was not so in the case of high quality livestock. Therefore the Order had a disparate impact on farmers of high quality cattle. This was contrary to the principle of equality established in European law, that similar situations should not be treated differently unless differentiation was objectively justified. The judge found no objective justification for the disparity.

The Secretary of State appealed on the basis that he was under no legal obligation to value the cattle according to their healthy market value. The true value of any animal identified as being affected by tuberculosis was the salvage value of its carcass, significantly below the amount of compensation payable to farmers under the Order.

The Court of Appeal allowed the Secretary of State's appeal. The fact that the Order affected one group of people differently to another group did not mean that it breached the principle of equality. The Order did not, in fact, seek to compensate farmers for the healthy market value of cattle removed for slaughter. Rather, it was intended to provide farmers with compensation greater than the salvage value of those cattle, while employing a consistent method of valuation under which all farmers were treated equally. Although it was possible that some farmers would suffer greater loss than others, this did not amount to discrimination.

Having decided that the claimant had not suffered discrimination, the Court of Appeal did not need to consider the issue of objective justification. However, it did appear to accept that the 2006 Order seeks to steer a middle course between compensating farmers on the basis of the salvage value for the carcasses of culled animals on the one hand and the market value of each individual animal, when healthy, on the other. The former approach, it was commented, would have been unpopular and damaging to farm businesses and the latter approach, which was in use before the introduction of the Order, had led to 'valuation creep', resulting in a serious problem of excessive compensation, to the detriment of taxpayers.

Whether or not there had been 'valuation creep' under the previous scheme probably depends upon what side of the fence you are on. There is little doubt that taxpayers are now better off following the introduction of the Order, the question however remains as to whether it is fair to those farmers with high value cattle affected by tuberculosis. Given the anger that is already felt in many livestock areas regarding badgers and the spread of bovine tuberculosis, this case can only add to those arguments raging around the culling of badgers in 'TB hotspots'.

The NFU has announced that it will support the claimant in seeking leave to appeal to the House of Lords.

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