The High Court decision in the case of Stody Estate Ltd v Secretary of State for Environment, Food and Rural Affairs  has shed interesting light on the question of whether, under EU subsidy schemes, a farm business is responsible for cross compliance breaches committed by one of its workers.
The Stody Estate, a farming company, owns and manages some 4200 acres of land and forestry in North Norfolk.
The company has an Estate manager who is responsible for the day to day management, assisted by 15 full-time employees.
Allen Lambert had been employed as keeper on the Estate since 1990 and lived in a tied cottage. His job included acting as gamekeeper and rearing 2500 pheasant and partridge poults each year.
In April 2013 Mr Lambert was arrested on suspicion of poisoning 10 buzzards and 1 sparrow-hawk on the Estate and he was later convicted of criminal offences under the Wildlife Conservation Act 1981 arising from this poisoning.
In September 2015, the RPA notified The Stody Estate that it was to be held “vicariously liable” for Mr Lambert’s actions in killing the wild birds, which constituted a breach of the applicable cross-compliance statutory management requirements (“SMR”) under the Single Payment Scheme. The RPA applied a reduction of 75% to the Estate’s payment for 2014, on the basis that the killing of the raptors had been an “intentional” breach.
The Stody Estate appealed to the Independent Agricultural Appeals Panel (“IAAP”). Following a hearing, the IAAP decided that Mr Lambert’s intentional actions could not be attributed to The Stody Estate, following the European Court of Justice (“ECJ”) decision in the case of Van der Ham v. College van Gedeputeerde Staten van Zuid Holland (“Van der Ham”). The IAAP instead recommended a 20% reduction.
The IAAP’s decision and recommendation was referred to the Secretary of State, who revised the reduction from
75% to 55%, concluding that the intentional acts of Mr Lambert, acting within the scope of his employment, were to be treated as those of the farmer (the Estate), subject to the mitigating circumstances available to the Estate (the reasonable steps it took to prevent non-compliance and its approach to environmental issues).
The Estate then applied for judicial review of this decision.
The relevant legislation governing penalties for breaches of SMRs is found in article 23 of Council Regulation (EC) No 73/2009 which provides that where there is non compliance with an SMR which is “the result of an act or omission directly attributable to the farmer who submitted the aid application …….the total amount of direct payments granted …….shall be reduced or excluded in accordance with the detailed rules laid down in Article 24.”
The Estate argued that holding it vicariously liable for the gamekeeper’s actions was contrary to the decision in Van der Ham and that an assessment was required of its degree of culpability in connection with the killing of the birds by the gamekeeper, whereas the decision had simply relied on the gamekeeper’s conviction.
In quashing the decision of the Secretary of State to impose a penalty reduction on the Single Payment Scheme payment, the High Court noted the following:
The Court found that the gamekeeper’s conviction alone did not satisfy the art. 23 requirement that cross-compliance breaches were “the result of an act or omission directly attributable to the farmer”. The
Court did not find any fault on the part of the Estate in connection with the gamekeeper’s actions, so the decision to impose a penalty under art. 23 was quashed.
Although this decision related to the Single Payment Scheme, the reasoning will apply to cross-compliance breaches under the Basic Payment Scheme (“BPS”), which are subject to an analogous administrative penalty scheme. The BPS rules use the same reference to non- compliance as “the direct result of an act of omission directly attributable” to the BPS claimant, although one of two additional qualifying criteria must be met before a penalty can be applied, namely:
The Stody case would have fallen within limb (ii) of that additional test.
The decision may also be relevant to breaches arising under future subsidy schemes, depending on the wording of new UK legislation applying to any relevant post Brexit subsidy scheme.