A2/2003/113 A2/2003/1131
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
(MR JUSTICE DAVIS)
Royal Courts of Justice
Strand
London, WC2
B E F O R E:
LORD JUSTICE CHADWICK
LORD JUSTICE LONGMORE
LORD JUSTICE MAURICE KAY
DEPARTMENT OF ENVIRONMENT, FOOD & RURAL AFFAIRS
Claimant/Appellant
-v-
MALTCO 3 LTD
CRISP MALTING GROUP LTD
Defendant/Respondent
(Computer-Aided Transcript of the Stenograph Notes of
Smith Bernal Wordwave Limited
190 Fleet Street, London EC4A 2AG
Tel No: 020 7404 1400 Fax No: 020 7831 8838
(Official Shorthand Writers to the Court)
MR RHODRI THOMPSON QC AND MR TIM EICKE (instructed by Solicitors to the Rural Payments Agency, Kings House, 33 Kings Road, Reading RG1 3BU) appeared on behalf of the Appellant
MR AIDAN ROBERTSON (instructed by Messrs Richards Butler, Beautfort House, 15 St Botolph Street, London EC3A 7EE) Appeared on behalf of the Respondent, Maltco 3 Ltd
THE RESPONDENT CRISP MALTING GROUP LTD WAS NOT REPRESENTED
J U D G M E N T
LORD JUSTICE CHADWICK:
These are appeals from orders made by Davis J on 26th March 2003 in proceedings brought by the Department of Environment, Food and Rural Affairs (commonly known as DEFRA) to recover monies alleged to have been overpaid by way of export refunds under Community legislation implementing the common agricultural policy in respect of the export of malt produced from barley within the Community. DEFRA claims as successor to the Intervention Board for Agricultural Produce.
The proceedings were commenced by the issue of claim forms on 28th September 2001 against each of three defendants: Maltco 3 Limited (a company formerly known as Hugh Baird & Sons Ltd), Crisp Malting Group Ltd and Pauls Malt Limited. The three sets of proceedings raised common issues; in particular, in each, the defendant raised limitation defences. On 22nd July 2002 it was ordered that the limitation issues should be treated as preliminary issues; and, for that purpose, the actions were to be heard together. It was that hearing of preliminary issues in the three actions which was before Davis J in February 2003. His judgment (handed down on 13th March 2003) sets out, at paragraph 8, a full statement of the issues that were before him and the relevant passages in an agreed statement of facts. It is unnecessary for me to rehearse those matters again in the context of these appeals. Nor is it necessary for me to set out the details of the regulatory regime under which export refunds were payable in pursuance of the common agricultural policy to exporters of malt to countries outside the European Union. I gratefully adopt the description of the regime which is contained in paragraphs 13 to 23 of Davis J's judgment.
At paragraphs 25 to 28, Davis J described the various claims which were made against the defendants in the three actions. In particular, he set out, at paragraph 28, the four groups of claim, as categorised in a table produced at the hearing before him by counsel for DEFRA. They were these:
"The first related to GSP claims, involving claims for export refunds made by exporters for exports prior to 15th April 1995 (cp Article 8 of Regulations 729/70 and 1258/99). Mr Thompson [counsel for the claimant] styled the proceedings to recover these sums as 'simple or common-law restitutionary actions'.
The second group also related to GSP claims, but in this instance involving claims for export refunds made by exporters for exports after 1st April 1995 (see, in particular, Article 11 of Regulation 3665/87 as amended). Mr Thompson styled the proceedings to recover these sums as 'penal restitutionary actions'.
The third group involved what Mr Thompson styled 'PFP security actions'. These involved the reconstitution and forfeiture of securities, (and payment of the corresponding sums with interest), offered (and subsequently released) for advances claimed under the PFP procedure (see, in particular, Article 6 of Regulation 565/80 and Article 33 of Regulation 3665/87 (as amended))
The fourth group involved what Mr Thompson styled 'licence security actions'. These involved the reconstitution and forfeiture, (and payment of the corresponding sums with interest) of securities offered (and subsequently since released) to back export licences: see in particular Articles 39 and 43 of Regulation 3719/88."
In that context, the GSP claims are claims made under the Grain Special Procedure, prescribed by Articles 3 and 4(1) of Regulation 3665/87; and the PFP procedure is the Pre-Finance Processing Procedure provided by Article 29 of that Regulation. The procedures are described in the agreed statement of facts and in the judgment summary of the regulatory regime.
The Judge's Findings
In order to address the limitation issues raised for determination, Davis J considered, first, which limitation provisions applied to each group of claims. Two Community regulations were identified as potentially applicable in this context: Council Regulation 2988/95 and Commission Regulation 800/1999.
Put very shortly, Article 3(1) of Regulation 2988/95 prescribed a limitation of four years from the date of commission of the "irregularity", as defined by Article 1(2), for the commencement of proceedings. Article 52(4) of Regulation 800/1999 also prescribed a period of four years, but that period was between the day of the notification to the beneficiary of the final decision on the granting of the refund, and that of the first information of the beneficiary by a national or Community authority concerning the undue nature of the payment concerned.
Davis J held that Regulation 800/1999 did not apply for limitation purposes to any of the DEFRA claims. He decided that Regulation 2988/95 did apply for limitation purposes to all the DEFRA claims, save for those claims which had been described in the categorisation, to which I have referred, as "common-law restitutionary claim"; that is category 1 claims. In relation to the common-law restitutionary claims, he held that the limitation regime was "that potentially applicable to administrative decisions under general principles of Community law" and, as such, potentially applicable under the Limitation Act 1980 including section 32(1)(c) of that Act.
As I have said, in that context common-law restitutionary claims are claims in respect of refunds for exports occurring before 1st April 1995. The reason why they are so described -- and the reason for the distinction between GSP claims in respect of exports made before 1st April 1995 and exports made after that date -- was explained by Davis J in paragraph 28 of his judgment:
"The reason for the distinction between the first two groups is this. Prior to 1st April 1995 nothing that may be described as a penalty, recoverable by application of the Community Regulations, had, so it might appear, been laid down by the relevant Regulations. Rather it had been left to Member States to deal with irregularities and to recover, pursuant to national law, sums lost as a result of irregularities..."
Davis J then referred to provisions of Community legislation and to two decisions of the Court of Justice. He went on:
"However after 1st April 1995 (by reason of Article 11 of Regulation 3665/87, as amended by Regulation 2945/94, and as subsequently replaced by Articles 51 and 52 of Regulation 800/99) what could be described (and was so described by Mr Thompson) as a penalty regime (with attendant recovery procedures) had been stipulated by Community Regulations."
The judge's findings on those points are reflected in the answers which he gave to the first two questions put to him by the preliminary issue. Those appear in paragraph 1 of the order made on 26th March 2003:
With regard to claims in respect of GSP irregularities occurring by reason of exports effected prior to 1st April 1995, the limitation regime is that potentially applicable to administrative decisions under general principles of Community law and, for the commencement of legal proceedings, that potentially applicable under the provision of the Limitation Act 1980 (including s32(1)(c), to the extent available.
Save with regard to claims in respect of GSP irregularities occurring by reason of exports effected prior to 1st April 1995, all claims are, for limitation purposes, governed by Council Regulation (EC) 2988/95.
Council Regulation (EC) 800/1999 does not, for limitation purposes, apply to any of the claims."
The first issue on these appeals is whether Davis J was correct in the answer which he gave under paragraph 1(i).
On the basis that Article 3(1) of Regulation 2988/95 was engaged, at least in respect of all claims other than common-law restitutionary claims (or category 1 claims, to adopt the DEFRA categorisation) the relevant date for the purpose of limitation was, prima facie, 28th September 1997; that being the date four years before the commencement of these proceedings. Claims in respect of refunds based on irregularities committed before that date were, again prima facie, out of time. But that prima facie conclusion was subject to a further paragraph in Article 3(1) of Regulation 2988/95 which provided that the limitation period should be interrupted by any act of the competent authority notified to the person in question relating to the investigation or legal proceedings concerning the irregularity.
In the circumstances that many of the DEFRA claims were in respect of exports made well before 28th September 1997, that saving provision was of obvious importance. Davis J was required, therefore, to address -- and did address -- the question: what constituted an interrupting act for the purposes of that saving provision in Article 3(1) of Regulation 2988/1995? He concluded at paragraph 82 of his judgment that the requirement of notification under that saving provision was not satisfied unless the notification specified, at the least a particular potential irregularity (or, perhaps, series of irregularities) which were the subject of investigation. He observed that, were it otherwise, the person notified would not know what claim he was potentially facing: what commercial documents he should retain; or to what extent he should budget or make contingences for any reparation.
On that basis, Davis J concluded that the evidential material before him was such that he could not safely make findings in favour of DEFRA on that issue; that is to say that he could not find that there had been notification sufficient to amount to an interrupting act or interrupting acts. Whether he was correct to take that view is the second issue raised on these appeals.
By a parity of reasoning, nor could he safely conclude that there had been no acts which would postpone commencement of the limitation period. Those conclusions are reflected in the answers which are given at paragraphs 1(iv) and 1(vi) of the order of 26th March 2003:
The legal effect of 'interrupting acts' is that the period of four years laid down by Article 3(1) of Regulation 2988/95 starts afresh from the date of such an act. ...
The remainder of the questions raised are appropriate for determination on the basis of disclosure and oral evidence."
The judge gave DEFRA permission to amend its pleadings so as to specify with more particularity the acts said to amount to interrupting acts for the purpose of Regulation 2988/95: see paragraph 6(iii) of the order of 26th March 2003.
These Appeals
Davis J gave DEFRA permission to appeal from his findings under paragraph 1(i) but refused permission to appeal from paragraph 1(vi) of his order. He gave the defendants permission to appeal from his findings under 1(ii) and 1(iii). Notices of appeal were filed by DEFRA in each of the three actions. DEFRA amended its pleadings, pursuant to the permission given on 26th March 2003, and sought permission to appeal from paragraph 1(vi) of the judge's order, on the basis that (by amendment) it had identified, with the necessary particularity, the events on which it relied as interrupting acts for the purposes of Article 3(1) of the Regulation 2988/95. Limited permission was given on that application by Latham LJ in this court on 29th July 2003.
On Tuesday of this week, 20th January 2004, there were listed for hearing before this constitution, first, appeals by DEFRA from orders made by Davis J under paragraph 1(i) in all three actions; second, appeals by DEFRA from orders made under paragraph 1(vi) in the two actions in which permission to appeal under that paragraph had been granted by Latham LJ; and third, an appeal by Pauls Malt Limited from the findings made under paragraphs 1(ii) and 1(iii) in the action to which it was defendant.
Shortly, before those appeals were due to be heard it came to the attention of DEFRA (and, I think, of Pauls Malt Limited) that Advocate-General Tizzano had submitted an opinion to the Court of Justice in the pending reference from Austria (Case C278/02; Herbert Handlbauer GMBH); and that that opinion addressed at least three of the points which were then in issue in the appeals pending in this court.
Following consideration of the Advocate-General's opinions in Handlbauer, Pauls Malt Limited notified DEFRA, on Thursday of last week, that it had accepted a Part 36 offer to compromise the proceedings which had been brought against it. The effect, under CPR 36.15, was to stay those proceedings. The proceedings being stayed, there was no longer any basis upon which this court could be asked to determine the appeal and the cross-appeal in the proceedings to which DEFRA and Pauls Malt Limited were the parties. Accordingly, when the court sat on 20th January 2004, it indicated that the appeal and the cross-appeal under reference 2003/1040 and 2003/1134 would be dismissed.
That left the appeals in the actions against Maltco and Crisp Malting Group Limited (under references 2003/1131 and 2003/1133), which have not been disposed of. It was made clear on 20th January 2004 that the respondents to those appeals had not come prepared to bear the burden of argument. It had been expected that they would be able to adopt arguments advanced -- and very fully set out -- in a skeleton argument on behalf of Pauls Malt in the appeal and cross-appeal to which it was party. In those circumstances the court adjourned appeals 2003/1131 and 2003/1133 to be heard today, on the basis that that would give the parties the opportunity to take stock and come prepared to argue the points which they wished to present. When the matter was resumed today, it had become clear, from correspondence, that Crisp Malting Group Limited did not intend to be represented at the appeal and would take no part on it. Maltco has been represented on the appeal and has argued the second issue only.
The First Issue
I turn, therefore, to the first issue: was Davis J correct to reach the conclusion, set out in paragraph 1(i) of his order of 26th March 2003, that the GSP claims in respect of exports effected prior 1st April 1995 did not fall to be dealt with under Article 3(1) of Regulation 2988/95?
In order to understand how that issue arises, it is necessary to set out the relevant text. Article 3 must be read in the context of Article 1, paragraph 2. Article 1(2) defines the word "irregularity":
"'Irregularity' shall mean any infringement of a provision of Community law resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the Communities or budgets managed by them, either by reducing or losing revenue accruing from own resources collected directly or indirectly on behalf of the Communities, or by an unjustified item of expenditure."
Article 3(1) is divided into four paragraphs, or indents, and is in these terms:
"The limitation period for proceedings shall be four years as from the time when the irregularity referred to in Article 1(1) was committed. However, the sectoral rules may make provision for a shorter period which may not be less than three years.
In the case of continuous or repeated irregularities, the limitation period shall run from the day on which the irregularity ceases. In the case of multiannual programmes, the limitation period shall in any case run until the programme is definitively terminated.
The limitation period shall be interrupted by any act of the competent authority, notified to the person in question, relating to the investigation or legal proceedings concerning the irregularity. The limitation period shall start again following each interrupting act.
However, limitation shall become effective at the latest on the day on which a period equal to twice the limitation period expires without the competent authority having imposed a penalty, expect where the administrative procedure has been suspended in accordance with article 6(1).
Article 3(2) provides that:
"... The period for implementing the decision establishing the administrative penalty shall be three years. That period shall run from the day on which the decision becomes final."
It will be noted, therefore, that, although in the first indent the Article speaks of the "limitation period for proceedings", in the fourth indent it refers to "penalty". In Article 3(2) the reference is again to "penalty". That is of relevance in the context of Articles 4 and 5 in Title II of the same Regulation.
Title II is headed: "Administrative Measures and Penalties". Article 4(1) refers to the general rule that any irregularity shall involve withdrawal of the wrongly obtained advantage by an obligation to pay or repay the amounts due or wrongly received, or by the total or partial loss of the security provided in support of the request for an advantage granted, or at the time of the receipt of an advance. Those are referred to as "measures": see Article 4(2). Article 4(4) emphasises the point by explaining that:
"The measures provided for in this Article shall not be regarded as penalties."
By contrast, Article 5 deals with intentional irregularities, or those caused by negligence which, as the Article provides, may lead to administrative penalties; those being, for example, the payment of a fine, or the payment of an amount greater than the amounts wrongly received or evaded, plus interest where appropriate.
There is, therefore, within Title II, a clear distinction between measures and penalties. There is, in Article 3, a reference to penalties but no reference, as such, to measures. That raised the question whether Article 3, which prescribed a limitation period for "proceedings", had application to proceedings which were in the nature of measures rather than proceedings which were for penalties.
Davis J explained the problem, as it appeared to him, at paragraph 65 of his judgment:
"Whatever imprecision there may be with regard to some of the wording in Regulation 2988/95, there is at least a clear distinction drawn between 'penalties' and 'measures': see Article 4.4 (and see also Article 2). In the case of his second, third and fourth groups of claims Mr Thompson submits that the irregularities give rise to the imposition of administrative penalties, within the ambit of Article 5.1(b) (for export refunds) and (1) (for pre-finance refunds and licence security claims), as the case may be: and that is so, by reason of Article 5.2, even if there be no deliberate intent or negligence involved. Accordingly, he submits, Article 3 applies to these claims. I accept those submissions. ...
However, in the case of irregularities occurring before 1st April 1995, no such penalty is, on the face of it, imposed by any Regulation in respect of GSP claims: rather, the Member States are simply required to recover (under their own laws and procedures) the sums lost: see Article 8 of Regulation 729/70 and Article 8 of Regulation 1258/99."
It was conceded that the claims in respect of GSP irregularities occurring by reason of exports effected prior to 1st April 1995 -- that is to say, the claims described as common law restitutionary claims -- did not come within the ambit of Article 5.1 of Regulation 2988/95. It was accepted that they fell within the ambit of Article 4.1; and so were measures and not penalties. That led to the need to consider whether proceedings to enforce common law restitutionary claims were within Article 3 at all.
Davis J came to the conclusion that they were not. He explained why he reached that conclusion, at paragraph 70 of his judgment:
"While the general purpose of Regulation 2988/95 is clear from the recitals it remains the case that 'measures' are distinguished from 'penalties' – see, for example, the wording of Article 2. One can see, in particular, from the express provisions of Article 4 a clear and expressed intent to distinguish 'measures' from 'penalties'. This group of claims falls, as conceded by Mr Thompson, within Article 4.1 and the remedies in consequence provided for (as conceded) are to be regarded as measures, not penalties: by virtue of the express provision of Article 4.4. Article 3, on its wording, does not extend to measures. It follows that the limitation periods set by Article 3 of Regulation 2988/95 do not apply to this particular group of claims."
Davis J did not have the benefit, which we now have, of the analysis in the judgment of the Court of First Instance in case T-125/01, Peix, which was delivered on 13th March 2003. By coincidence that judgment was delivered on the day on which he delivered his own judgment in the present case. The judgment of the Court of First Instance in Peix appears to have come to the attention of the parties because it was referred to by Advocate-General Tizzano in his opinion in Handlbauer. The judgment in Peix It is of importance because it addresses the very question with which Davis J was concerned in the paragraphs of his judgment to which I have just referred. I read paragraphs 78 to 80 of the judgment in Peix:
Article 3(1) of Regulation 2988/95 sets a limitation period for proceedings of four years as from the time when the irregularity referred to in Article 1(1) was committed. The notion of irregularity, defined in Article 1(2), refers, for the purposes of applying that regulation, to any infringement of a provision of Community law resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the Communities or budgets managed by them, either by reducing or losing revenue accruing from own resources collected directly on behalf of the Communities, or by an unjustified item of expenditure.
In the absence of any indication to the contrary, the notion of irregularity defined in Article 3(1) of Regulation No 2988/95 by reference to the wider sense given to it under Article 1 of that regulation should be considered to cover both intentional irregularities or those caused by negligence, which could, in accordance with Article 5 of the regulation, result in an administrative penalty, and irregularities which justify merely the adoption of an administrative measure referred to in Article 4 of the regulation. Consequently, without its being necessary to rule on the question whether the reduction of the aid decided in the present case must, as the Commission contends, be considered an administrative measure within the meaning of Article 4 of Regulation No 2988/95 or, as the applicant claims, be considered an administrative penalty within the meaning of Article 5 of the regulation, it must be found that Article 3 of that regulation is applicable to the irregularities at issue in the present case.
In those circumstances, it is appropriate to examine the substance of the applicant's argument based on the time-barring of the facts by reason of Article 3(1) of Regulation No 2988/95."
So the Court of First Instance -- giving its judgment on the same day as Davis J -- found no difficulty with the point which had concerned him. It held, in effect, that it did not matter whether the proceedings which the competent authority was adopting were in the nature of "penalty" under Article 5 or "administrative measure" under Article 4. In either case, the limitation period of Article 3(1) applied.
It was pointed out to us on behalf of DEFRA that we are bound by the decision in Peix and must apply it. That requirement is imposed by the European Communities Act 1972 section 3(1), which is in these terms:
"For the purposes of all legal proceedings any questions as to the meaning or effect of any of the Treaties, or as to the validity, meaning or effect of any Community instrument, shall be treated as a question of law (and, if not referred to the European Court, be for determination as such in accordance with the principles laid down by and any relevant [decision of the European Court or any court attached thereto)]."
In that context, "the European Court" includes the Court Of First Instance: see the definition in Schedule 1 to the 1972 Act, which is incorporated by section 1(2) of that Act. It follows that a decision of the Court of First Instance on a question of law is a decision which must be applied in this court on a question of law. The question "what is meant by proceedings, in the context of Article 3(1) of Regulation 2988/1995 is a question of law, and so we should follow Peix.
Any concern that the decision in Peix might subsequently be held to have been wrong by the Court of Justice itself is met -- in part, at least -- by the approval given to Peix by Advocate-General Tizzano in his opinion in Handlbauer. In that opinion, submitted on 15th January 2004, the Advocate-General addresses the same question at paragraphs 39 to 54. For our purposes, it is, I think, sufficient to refer to paragraphs 48 and 52:
Now, as the court has already had occasion to rule in the Peix judgment, 'in default of an indication to the contrary, it is inappropriate to consider that the concept of irregularity defined by the Article 1, paragraph 1 of the directive No 2988/95 with reference to the broad interpretation of it by Article 1 of the said directive does indeed cover intentional irregularities or irregularities caused by negligence which could, in accordance with Article 5 of this directive, lead to a penalty and that the irregularities indeed justify the passing of an administrative measure as stipulated in Article 4 of the directive.' Consequently, as the court itself has found, in the event of an irregularity, the applicability of Article 3 of the above-mentioned directive is admitted on any assumption, independently of the status of the 'administrative penalty' within the strict sense or 'measure' of the action taken by the competent authority."
This interpretation, finally, does not appear to be contradicted by the fact that Article 3 of directive 2988/95 stipulates, in paragraph 1, a period of limitation for prosecutions and, in paragraph 2, a period of limitation for the imposition of penalties. To the contrary, we consider that recourse, in the first provision, to an expression wider than the term 'penalty' confirms that this provision is applicable to a category of actions broader than that considered in the following provision. The period of limitation in paragraph 1 of Article 3 therefore does not only relate to 'penalties in the strict sense' but, more generally, to all actions which, by virtue of the directive, may be undertaken to prosecute offences which harm the financial interests of the Communities."
There seems consensus, therefore, in Luxembourg as to the resolution of the issue which Davis J was addressing. It cannot be doubted that, had Davis J had the benefit of that decision and that opinion, he would have felt bound to reach a different answer on that first issue.
For my part, I accept that we are bound by the decision in Peix, and should allow the appeal on the first issue; thereby, reversing the judge's finding under paragraph 1(i) of his order of 26th March 2003.
The Second Issue
That leads to the second issue: was Davis J correct to take the view that the evidence before him was not sufficient to enable him to reach a conclusion in favour of DEFRA that there had been interrupting acts, within the meaning of the third indent of Article 3(1) of Regulation 2988/1995, so as to postpone the commencement of the four-year limitation period? On that issue that we have had the advantage of submissions on behalf of Maltco. The skeleton argument submitted by counsel is commendably succinct: Maltco's position is that the finding of Davis J, set out in his order dated 26th March, is correct for the reasons given in his judgment and that Advocate-General Tizzano's opinion casts no doubt on that.
This is not a matter which is addressed in Peix. But it is a matter which receives consideration in Advocate-General Tizzano's opinion in Handlbauer. There are, on analysis, two distinct questions: first, what is the test that should be applied in order to identify an interrupting act for the purposes of the third indent in Article 3(1); and second, having established what that test is, have DEFRA shown that there are acts in this case which plainly fall within it?
It had been DEFRA's intention on this appeal to challenge the judge's conclusion on the first of those questions. That is the conclusion to which I have referred already, where he identifies the need for the specificity: see paragraph 82 of his judgment. But, a challenge to that finding is now no longer pursued on this appeal in the light of the Advocate-General's opinion in Handlbauer.
It is enough to refer, I think, to the following paragraphs in that opinion. At paragraph 69 the Advocate-General identified the second question referred to the Court of Justice in these terms:
"... whether the notification of a control in question in the present matter is an action relating to an investigation or prosecution of an irregularity which interrupts the period of limitation given in Article 3, paragraph 1, part 3 of directive 2988/95."
After setting out the fact and arguments, he said at paragraph 78:
"Despite the contrary opinion of the Commission, in effect, we think that Handlbauer was right to argue that the formulation of this provision leads to the assumption that the limitation could be suspended only if the action relating to the investigation or prosecution of the irregularity and notified to the interested party relates to one or more specific irregularity.
It is in this sense that all the linguistic versions of the provision in question argue, in any case, in which it is clear that the action suspending the limitation must be intended to find or prosecute 'the irregularity'. Even the action relating to investigation, therefore, cannot relate to unspecified irregularities, but must relate to a specified irregularity."
And, at paragraph 81:
"... what is important is that it is obvious that this authority is investigating the legality of this specific behaviour."
Advocate-General Tizzano pointed out that that approach was not going to cause excess difficulties to the competent authority. At paragraph 85 he explained that the administration is not being asked to find the irregularity in order to have the benefit of a new period of limitation:
"It is sufficient that, in the action communicated to the interested party, it indicates the irregularity specifically, namely that it expresses to the operator its doubts with regard to the legality of a specific behaviour observed by it."
His observations are summarised in conclusion 3 at paragraph 90:
"Within the meaning of Article 3, paragraph 1, part 3, of the directive 2988/95 the period of limitation for prosecuting a specific irregularity is not suspended by the notification of a specific control carried out in accordance with directive 4045/89, on the basis of irregularity risk factors and, in particular, in consideration of the frequency of actions causing damage to the financial interests of the Communities, if this notice relates without distinction to all operations carried out by an economic operator in the context of several organisations of markets in the course of a relatively extended period. For there to be a suspension of the limitation, it is necessary for the action brought to the knowledge of the interested party to describe specifically one or more particular irregularities."
That, as it seems to me, is in very much the same vein as the judge's conclusion, at paragraph 82 of the judgment in the present case, that the notification, both as a matter of wording and sense, must involve at least an indication to the person in respect of a particular potential irregularity or series of irregularities. The reason, as Davis J points out, is obvious: what is needed is that the person should know what he was potentially facing; what commercial documents he should retain; and to what extent he should make provision for the contingency of repayment.
Faced with the opinion of Advocate-General Tizzano in Handlbauer, DEFRA does not pursue a challenge to the judge's test as a matter of principle. But DEFRA submits that, on the basis of the permission to appeal granted by Latham LJ, it can satisfy that test. The permission to appeal was limited to:
"... whether the following constituted 'interrupting acts' within the meaning of and for the purposes of Article 3 of Council Regulation (EEC) No 2988/95:
The letters sent to Maltco by the Intervention Board for Agricultural Produce dated the 28th of January 1997 and the 6th October 1998..."
Those are two of many letters which are relied upon by the amendment to the pleadings and which have been provided to us in a bundle on this appeal.
The letter of 28th January 1997 was sent by the Intervention Board to Hugh Baird & Sons Limited (the name by which Maltco was formerly known) and is in these terms:
"SCRUTINY AUDIT UNDER REGULATION (EEC) NO 4045/89
RETENTION OF RECORDS
Scrutiny Control Visits to Hugh Baird & Sons Ltd of 10-12 June 1996 and 9 December 1996 refer.
The above mentioned visits highlighted potential irregularities in relation to claims for export refund. These were specifically in respect of processing of Pre-finance Declared Stocks during the 1992 and 1993 calendar years (Regulation (EEC) Nos 1680/78 and 3665/87 refer).
In the circumstances, and under the conditions of Article 4 of Regulation (EEC) No 4045/89, I require that you retain your Stock and Export Records relating to the above mentioned calendar years until this matter has been settled."
The letter is signed by Miss Hinton, a scrutiny officer.
It was submitted to us that a letter in those terms, received by a person in a position of the addressee and familiar with the relevant Regulations relating to the claim for export refunds in respect of pre-finance prepared stocks under the Regulations 1680/78 and 3665/87, which are referred to, would put the recipient on notice of the nature of the irregularities which were being investigated. The Regulations referred to relate to what is commonly described as "new for old stock"; that is to say they are designed to enable some carry over of stock of a previous year so as to qualify for refunds at an enhanced rate; but not to include, during the overlap period, new stock produced from the harvest during that period. The recipient would know that it was that that was under investigation.
That may well be so. But it is not necessary to decide the point, and I do not do so. The reason why it is not necessary to decide the point is that, if the letter of 28th January 1997 alone were to be relied upon, proceedings would have had to have been started on or before 28th January 2001; and that did not happen. The proceedings were commenced more than four years after the date of that letter. So that letter, even if it would have been of itself an interrupting event, would not enable DEFRA to rely on the saving provision in Article 3(1) of Regulation 2988/1995.
DEFRA seek to overcome apparent difficulty by reliance on the second of the letters referred to in Latham LJ's order - that letter dated 6th October 1998. That letter is in these terms:
"SCRUTINY AUDIT UNDER COUNCIL REGULATION (EC) 4045/89
As you will be aware in order to complete a scrutiny of export refund payments we hold certain of your company's documents relating to the period 1995/1996.
It is our intention to expand the scope of this scrutiny exercise to cover all payments in the period 1993 to 1997 and consequently I am writing to request that all records relating to this period that are not already in our possession are retained and made available for inspection. The major part of this additional documentary inspection will be undertaken at our office here in Reading and Ms Debbie Hinton will contact you in due course to pick up the required records.
Thank you in advance for your co-operation. If you have any queries with regard to this scrutiny exercise please don't hesitate to contact me."
Mr Thompson, on behalf of DEFRA, did not, I think, suggest that if the letter of 6th October 1998 had stood alone it could meet the test formulated by Advocate-General Tizzano or the test applied by Davis J. If I may say so, he was right not to do so. This is just the sort of letter, as it seems to me, which does not meet the requirements of specificity identified in Advocate-General Tizzano's opinion. The letter does no more than indicate an investigation of all payments over a four-year period.
It is said, however, that the right course is to read the letter of 6th October 1998 with the letter of 28th January 1997, so as to understand that the reference in 1998 to "all payments" is not really a reference at all to "all payments"; but only to payments in respect of the processing of pre-financed declared stocks under the Regulations mentioned in the earlier letter.
It may well be that evidence could be adduced to show that the circumstances in which the letter of 6th October 1998 was written and received justifies that approach. And that, if that approach is adopted, then it will be found that, read together, the two letters are sufficiently specific. But, once evidence of the context in which those letters are written is to be relied upon by DEFRA, there must be an opportunity for the exporter to adduce such evidence as it may be advised as to what was, in fact, happening over the years 1997 and 1998. That prompts fact-finding exercise which Davis J had in mind when he made his order.
We were urged to take the view that it is really a waste of time and resources for the courts to engage in finding facts in a case of this nature. But I reject the submission that dispute resolution, under the CPR, has reached that point. Facts are still there to be found; and this is a case in which, if DEFRA wish to rely on the saving proviso in Article 3(1), it will have to establish the facts that are necessary for it to do so.
In my view, Davis J was correct to reach the conclusion which he did on the basis of the test which he applied. As I have said, in the light of Advocate-General Tizzano's opinion, it is not suggested that his test can be challenged in this court.
Accordingly, I would dismiss the appeal on the second issue.
LORD JUSTICE LONGMORE: I agree.
LORD JUSTICE MAURICE KAY: I also agree.
(Appeal allowed on the first issue, but dismissed on the second issue. No order as to costs in A2/2003/1131. In A2/2003/1133 no order as to costs save that Maltco is to have its costs on issue 2 incurred since 19th January 2004.)