Agro Foods (Ashford) Ltd, R. (on the application of) v Food Standards Agency

This case arises in a regulated world where food business operators need statutory approvals and official controls from the defendant (the Agency), in order lawfully to be able to operate establishments such as slaughterhouses. The Agency is permitted, pursuant to regulation 3(4) of the Meat (Official Controls Charges) (England) Regulations 2009 (the 2009 Regulations), to impose and collect charges for providing the official controls. This case is about the scope of the Agency’s powers in circumstances where charges have gone unpaid and a court judgment for their recovery has been obtained. The claim is for judicial review. It raises a question of statutory interpretation concerning regulation 4 of the 2009 Regulations, which provides as follows (with underlined emphasis added):

Regulation 2(1) of the 2009 Regulations, which makes reference to the relevant EU legislation and incorporates certain EU definitions (two of which I will interpose here), includes the following interpretative provision:

…

“food business operator” has the meaning given to it in Article 3.3 of Regulation 178/2002;

[I interpose that Article 3.3 provides: “‘food business operator’ means the natural or legal persons responsible for ensuring that the requirements of food law are met within the food business under their control”]

…

“game-handling establishment” means any establishment in which game and game meat obtained after hunting are prepared for placing on the market and which—

(a)

is approved or conditionally approved under Article 31.2 of Regulation 882/2004; or

(b)

(although lacking the approval or conditional approval that it requires under Article 4.3 of Regulation 853/2004) was, on 31st December 2005, operating as a licensed wild game processing facility under the Wild Game (Hygiene and Inspection) Regulations 1995;

…

“inspector” means an official veterinarian, an official auxiliary or any other person appointed by the Agency for the purpose of performing controls;

…

“official controls” shall be construed in accordance with the definition of “official control” in Article 2.1 of Regulation 882/2004;

“official controls charge” means the charge calculated in accordance with

Schedule 2 and notified in accordance with regulation 3(1), (2) or (3);

…

“operator” means a food business operator who is carrying on a food business at any premises, or his duly authorised representative;

…

“premises” means any slaughterhouse, game-handling establishment, cutting plant, place that is outside the slaughterhouse for the purposes of Chapter VI of Section I of Annex III to Regulation 853/2004, farm or place of origin;

“slaughterhouse” means an establishment used for slaughtering and dressing animals, the meat of which is intended for human consumption and which— (a) is approved or conditionally approved under Article 31.2 of Regulation 882/2004; or

This is a ‘phoenix’ operator case. That is a description which I have taken from the judgment of Cranston J in Allan Rich Seafoods v Lincoln Magistrates Court [2009]

The ‘phoenix’ scenario in the present case arises as follows. Charing Meats Ltd (CML), incorporated on 23 November 2015, obtained conditional approval on 2 December 2015 and full approval on 17 March 2016 to operate a slaughterhouse at The Abbatoir, Ashford Road, Charing, Kent. Official controls were provided by the Agency and charges were notified. CML failed to pay and six sets of legal proceedings ensued. On 19 December 2017 a judgment was entered against CML, by consent, in the sum of some £85,000. The judgment included a stay while agreed payments of £2,000 per month of the arrears were made. By March 2018 CML was again in default and the stay was lifted, so that the whole judgment became enforceable. CML ceased trading on 28 March 2018 and the Agency’s solicitors wrote on 4 April 2018 to CML seeking recovery of what was by then in excess of £100,000. Meanwhile, on 22 March 2018 the claimant (Agro Foods (Ashford) Limited) was incorporated, after which the claimant purchased CML’s assets and began trading from the slaughterhouse. CML and the claimant had the same director, Mr Jewel Ahmed. On 28 April 2018 the Agency formally issued notice of regulation 4 withdrawal of official controls at the slaughterhouse, with effect from 27 April 2018. On 1 May 2018, the claimant agreed to pay £1,000 per week off CML’s arrears and official controls were reinstated the next day. The claimant secured conditional approval on 15 May 2018 and full approval on 14 November 2018. CML was placed in voluntary liquidation on 22 June 2018 and Mr Ahmed made a formal statement of affairs in respect of CML on 12 June 2018, referring to the more than £100,000 owing by CML to the Agency. On 29 August 2018 the claimant’s solicitors wrote to the Agency challenging the lawfulness of the collection of CML’s arrears from the claimant. On 12 October 2018 the claimant discontinued the weekly payments of £1,000 from those arrears, having paid some £23,000.

Continuing the story, on 14 January 2019 the Agency issued a decision invoking regulation 4 and withdrawing official controls with effect from 21 January 2019, until CML’s arrears of now some £82,000 were paid by the claimant. On 21 January 2019 the claimant commenced these judicial review proceedings, challenging the decision of 14 January 2019 and seeking recovery of the £23,000 as unlawfully levied charges. Having been threatened with an interim relief application the Agency decided to continue ongoing official controls pending resolution of the claim, on the basis that the claimant would continue to pay the charges in respect of ongoing official controls. Permission for judicial review was granted on 29 April 2019. The substantive hearing was subsequently fixed. The pleadings, evidence and skeleton arguments were all filed.

The Allan Rich (Lincoln) case was not a case about charges or official controls. It was, however, a case which addressed the nature of the legal concept of “establishment” for the purposes of the same statutory scheme as is in play in this case. It is that concept of “establishment”, as analysed in Allan Rich (Lincoln), which is the lynchpin of the claimant’s argument in this case.

The analysis in Allan Rich (Lincoln) came to this. An “establishment” is the ‘unique three-dimensional entity’ which is a combination of ‘where-what-who’ features (I will connote these as X-Y-Z): a particular physical place (X) where a particular business operation (Y) is conducted by a particular operating person (Z). The logic would be that, by changing any one of these features a different ‘unique three-dimensional entity’ is produced. That would mean there is a distinct “establishment”, which in principle would then require a distinct approval. The logic allows for the same person (Z) being able to operate more than one “establishment”, by operating in parallel in the same way but at distinct locations (which I can connote as X-Y-Z and A-Y-Z). The logic means that a transfer by an operator to a successor, of a particular business at a particular location, in principle produces a new and distinct “establishment” (which I can connote as X-Y-Z becoming X-Y-B). That is the idea of “establishment”. Cranston J put it in this way:

In the present case it was agreed that this ‘three-dimensional unique entity’ approach to “establishment” is correct. Counsel on both sides agreed on the ‘where-what-who’ components of the analysis. Reference was made to the sequel case of R (Allan Rich Seafoods Ltd) v West Lindsey District Council [2010] EWHC 1232 (Admin) [2010] CTLC 41 but neither party considered it necessary for me to delve into that or other caselaw. In Allan Rich (Lincoln) the need to analyse “establishment” had arisen because local authority action was being taken against ARS for operating an unapproved establishment. As the judge there explained, the requirement that a food business operator ensure that an establishment is approved by a competent authority was derived from Article 6(3) of Regulation (EC) 852/2004 (see §24). The issue was whether ARS could rely on an approval originally granted to ASL, to show that ARS had been operating an approved establishment. In other words, ARS was arguing that the three-dimensional entities X-YZ and X-Y-B were the same “establishment”. Cranston J rejected that argument.

On the basis of the agreed understanding of “establishment” it was common ground that the claimant would be right on the question of statutory interpretation in this case if the drafter of regulation 4 had used “establishment” rather than “premises”, so that regulation 4 instead had read:

Before turning to analyse the claimant’s argument these further points are worthy of emphasis: First, it is agreed that charges are “payable … under regulation 3(4)” by the operator who operated the premises at the time when the controls were exercised. Counsel were agreed that if there were a change of operator at the same location but midway during an accounting period, each operator would be liable to pay charges, and only in respect of those controls which had been exercised while that operator was the operator of the premises. That, they agreed, is how regulation 3(4) is to be interpreted and applied.

Secondly, it is agreed that there is nothing in EU legislation or domestic primary legislation including the Human Rights Act 1998 which requires that the power in the relevant respect be confined rather than unconfined. The drafter of regulation 4 was not required to have the confined power. The claimant accepts that the power could lawfully be unconfined in the relevant sense, if clearly and expressly so designed.

Thirdly, it is common ground that if the power was relevantly unconfined so that the Agency had the power (vires) to act under regulation 4, it acted lawfully in exercising that power in this case. This is why I used the phrase ‘in an appropriate case’ in describing the position if the power is unconfined. Regulation 4 confers a power to withdraw controls; it does not impose a duty to do so. A statutory power must be exercised fairly and reasonably. Reasonably, in the present context, would in my judgment be likely to include considerations of proportionality. Mr Hercock accepts in the present case that, if the power in principle extends to discontinuing controls in respect of a successor operator at the same location, there is no basis for impugning the fairness, reasonableness (or proportionality) of the exercise of the power in the present case. In my judgment he is plainly right about that.

Fourthly, it was common ground that the statutory scheme confers no power on the Agency to refuse approval or withdraw approval for any establishment or any operator, by reference to unpaid charges, by whomever there has been default in paying charges. Decisions relating to granting, refusing and withdrawing approval are, it was agreed, required to be reached on the hygiene merits. If an establishment meets the applicable standards as to hygiene then an approval cannot be withheld. If an establishment continues to meet the applicable standards as to hygiene then an approval granted cannot be withdrawn. That means an actual or anticipated default in paying charges is no basis, under the statutory scheme as it has been designed, for refusing an approval to a successor company.

I turn to consider Mr Hercock’s argument on behalf of the claimant. I express my gratitude to him and Mr McGurk for the Agency, and to those who instructed them, for their assistance. The claimant’s argument really came to this: that “premises” in regulation 4 means “establishment (unit of food business) for which approval has been granted”; so that “those premises” means “the approved establishment of the operator against whom the judgment was entered”. On that basis, Mr Hercock submits, the power is confined and the Agency is entitled to refuse to exercise further controls only at premises whose current operator is the same operator against whom the judgment was entered; and not if it is a successor operator.

The essential steps in this argument, as I saw them, were as follows.

I accept Mr Hercock’s key points at Step i) and have adopted that approach to interpretation, but I cannot accept his interpretation. In my judgment, “premises” in regulation 4 is not conceptually identical to “establishment”; and “those premises” is not conceptually identical to “that establishment” being “the approved establishment of the operator against whom the judgment was entered”. The power is not confined so as to be available only in respect of the defaulting operator against whom the judgment has been obtained and who has failed to satisfy it. The features which lead me to that conclusion are as follows.

First, the ordinary and natural meaning of the words “any premises” and “those premises” connote the same physical facility where a predecessor operator and a successor operator can each at different times have operated in a way requiring official controls. It is a natural use of language to speak of that as involving the same “premises”: “those premises”. The facts of the present case powerfully illustrate that. To sell the business and put ‘under new management’ over the door does not connote different “premises” as a matter of ordinary language.

Secondly, Regulation 4 does not use “establishment” and “that establishment”. The claimant says that it how it should be read. But the drafter could so easily have said this. The tools were readily to hand. Looking objectively, it is unconvincing to think of the drafter as intending “establishment” and then achieving that intention, not by using that word straightforwardly, but through an three-step indirect process of dual incorporation by reference, by providing that “premises” means “slaughterhouse [etc]”; and then by providing that “slaughterhouse” means “an establishment … which … is approved”. Why not just say “establishment” directly?

Thirdly, it is right that “establishment” has been recognised to be the ‘unique threedimensional entity’ which I have described above. However, as I have just explained, “establishment” was not used in regulation 4; “premises” was. The provisions of regulation 2(1) do not, in my judgment, lead to the unqualified proposition that there is a conceptual identity between “premises” and “establishment”. Regulation 2(1) does not say that. It does not even say “‘premises’ means ‘establishment’”. In my judgment, the drafter was not displacing the common sense, physical nature of “premises”. The correct, objective interpretation is the common sense one. It can be put in this way. We understand that “premises” have a nature which is physical. But, under the 2009 Regulations we need to know this: what premises are we talking about? What is the physical entity? What physical entity do we “mean”? The drafter answers that question in regulation 2(1): “‘premises’ means any slaughterhouse …”; and in turn

“‘slaughterhouse’ means an establishment …” This makes sense, but does not require us to forget the physicality which connotes “premises”, as a matter of common sense and in this statutory scheme. For “premises” is a physical entity: it is the ‘where’. There is another way the same idea can be put. Identifying the “slaughterhouse”, which is the

“establishment”, tells us what the “premises” are because it tells us where they are, which is what we need to know.

Fourthly, this physical, locational approach to “premises” was unmistakeably adopted by Cranston J himself in Allan Rich (Lincoln). That, it will be recalled, was the judgment which recognised the ‘unique three-dimensional entity’ approach to “establishment”. I therefore return to §46 of Cranston J’s judgment, this time in full, illustrating with my added emphasis how he clearly saw “premises” as the physical feature (where) the threedimensional entity which was “establishment”:

Fifthly, this understanding of “premises” finds reinforcement in the 2009 Regulations themselves. The three-dimensions of “establishment” can clearly be seen in regulation 2(1) itself, when it provides that: “‘operator’ means a food business operator who is carrying on a food business at any premises …” It can be seen that “premises” is there being used as one of the three dimensions, alongside the other two. It would in my judgment if the word “premises” itself connoted “establishment” so that it already meant the unique combination of the particular location (where) and the particular “food business” (what) and the particular “operator” (who). That would also mean that there is no word in the Regulations for the location, because the obvious word – “premises” – could not be the right one. “Premises” is the place where officials have to go to provide controls; where “time costs [are] generated by those premises” (Schedule 2 §1). “Premises” is where a demand is to be delivered, or can be affixed (regulation 5(3)). “Premises” of an “operator” can be occupied or unoccupied, which is why regulation

Sixthly, it is relevant to have in mind the consequences of the competing interpretations. If regulation 4 were confined in its application to cases where the defaulting operator – against whom judgment has been entered – remains in operation and seeks continued official controls, the Agency would be at the mercy of ‘phoenix’ arrangements by which a controlling person behind a corporate entity could acquire a new corporate entity and

Seventhly, this analysis is not technical legal sublety; nor is it loose expansionism. It is, in my judgment, the objectively clear and straightforward interpretation, approached with the rigour suitable to a charging provision with penalising and intrusive consequences. It means there is a power, which must be lawfully exercised. It is not, in my judgment, an interpretation which renders the power open to arbitrariness, absent a greater degree of drafting precision in the legislation, whether applying common law standards nor for that matter applying standards of legal certainty found within the ECHR case-law, even assuming that rights under Article 1 of Protocol 1 to the Human Rights Act 1998 are interfered with, which in those circumstances it is unnecessary to decide. The protections against arbitrariness lie in the public law restrictions applicable to the exercise of the power.

I cannot therefore accept Mr Hercock’s key points at Steps ii) or iii), and his monetary claim also fails.Inevitably, other points were made by the parties. They included reference to the broader EU and domestic legislative framework; the EU Charter for Fundamental Rights; Explanatory Notes and an Explanatory Memorandum; case-law and textbook commentary on principles of statutory interpretation; materials relevant to just satisfaction under the Human Rights Act 1998. None of these in my judgment took matters any further in either direction, once the essentials were identified and analysed.

That leaves two matters with which I should deal. The first is to explain the approach I took to the evidence filed by the Agency. This was relevant to Mr Hercock’s Step i) which, as I have explained, I accepted. On this topic, I adopted the same approach as was articulated by Sales J (as he then was) in Bogdanic. He said this:

Even if there are cases in which it could be appropriate to have regard to internal documents as being an aid to construction, I am quite satisfied that this is not such a case. Mr McGurk invited me to accept witness statement evidence and accompanying documents as supporting a conclusion that the “mischief” at which regulation 4 was aimed was, or included, the ‘phoenix’ company scenario. I reject that contention. I add this: (1) I regard it as clear from the structure and wording of regulation 4, as well as the obvious significance of a case where the defaulting operator remains in occupation, that the ‘phoenix’ scenario was not the sole problem addressed by regulation 4 nor could the materials have supported a contrary view; (2) I regard it as clear and supported by the position in the public domain (see Allan Rich (Lincoln) itself) that ‘phoenix’ company scenarios were a real and significant phenomenon providing part of the setting in which regulation 4 was drafted; and (3) The materials in this case would not have supported a smooth and uniform picture, identifiable at the relevant time, even leaving aside the constitutional perils of relying on internal unpublished materials described by Sales J.

The other matter with which I must deal is the giving of my reasons relating to requested adjournment of the substantive hearing, which request I refused with reasons to follow.

I was not willing to adjourn the hearing. The request was far too late in the day. The hearing had been fixed. There was no proper application and no proper reasons. The costs had all been incurred. The issue was a question of law and both legal teams were in a position to deal with it. Any question as to costs and who should pay them would depend on success or failure in the case and the merits of any application, dealt with in a procedurally proper manner, as and when it arose. The claimant’s solicitors were on the record and the claimant’s Counsel had been briefed. It would not be in the interests of justice, nor in the public interest, to adjourn. I did not need to conduct an investigation, or allow further time, to make a factual enquiry as to the recent past and the present position. It was relevant for me to know that, on the face of it and by reference to documents in the public domain at Companies House, the claimant had appointed a new director Mr Williams on 2 September 2019 and Mr Ahmed’s directorship had been terminated on that same date, 2 weeks before the substantive hearing. I was also shown a copy of what was on its face an application for approval from a new food business operator called Farm Fresh Quality Foods Co Ltd, whose director is said to be a Mr Palekar, at the same location. Concerns were understandably expressed on behalf of the Agency. Their position was that it was in the interests of justice, and the public interest, to hear the argument and determining the question of law. I agree, and that is what I did.

Mr McGurk made clear that the Agency accepted that Mr Hercock and his instructing solicitors had acted with candour and propriety in their presentation of the position to the Court, in explaining the circumstances, and in their preparedness to remain to assist the Court so that I could hear the arguments on the point of law and determine it with full assistance. So do I.

I was also satisfied that this case had been properly and fully prepared, that it was fully and squarely put in writing and orally, so that there was on the face of it no conceivable disadvantage to the claimant from any discontinuance of communication between it and its lawyers, for whatever reason that position has arisen.

For the reasons explained above, the claim for judicial review will be dismissed.