Kelsall & Ors, R (on the application of) v Secretary of State for Environment, Food & Rural Affairs

A compensation scheme made under the Fur Farming Prohibition Act 2000 must operate fairly and rationally. A scheme may use standardised valuations and need not calculate each business precisely, provided its overall operation is fair.

Where compensation is separately provided for lost profits and income-producing stock, the two heads must be treated coherently. Factors reflected in one head should not be used again to reduce the other. A scheme that omits the residual value of breeding males, fails to recognise materially different values of premium breeds, or penalises farmers by reference to an unfairly selected cessation date may be irrational, discriminatory and contrary to Article 1 of the First Protocol.

The claimants were ten former mink fur farmers whose businesses became unlawful under the Fur Farming Prohibition Act 2000. They sought judicial review of the Fur Farming (Compensation Scheme) (England) Order 2002, which provided compensation for lost profits and specified non-income losses, including the residual breeding value of female mink.

They challenged the consultation process, the Secretary of State’s consideration of objections to any compensation, and the fairness, rationality and compatibility with Article 1 of the First Protocol of the provisions concerning breeding stock. Particular complaints concerned the omission of breeding males, the same valuation for premium and brown breeds, and reductions based on the date on which farming ceased.

1. The claim succeeded in substance. The court held that the compensation scheme was required by the implicit scope of section 5 of the Fur Farming Prohibition Act 2000 to be fair and rational. The court also applied the Convention requirement that compensation be reasonably related to the value of property taken and that the scheme not be so inflexible as to ignore substantially different situations, as illustrated by Lithgow v UK (1986) EHRR 329 and Papachelas v Greece (1999) (application no. 31423/96) (paras 62–63).
2. The Secretary of State was entitled to consult persons beyond the fur farmers and their representatives. Section 5(4) was not exclusive, and wider consultation could provide relevant and valuable contributions (para 25).
3. The court did not determine whether views advocating no compensation had unlawfully influenced the scheme, because the evidence conflict would have required disclosure and cross-examination and the remaining grounds disposed of the claim (paras 27–32).
4. The omission of compensation for breeding males had no sensible justification. Breeding required both male and female animals, and the evidence did not support treating the value of males as covered by pelts or lost-profit compensation (paras 45–48).
5. Equal compensation for premium breeds and brown mink was unfair and irrational. The lower productivity and greater disease vulnerability of premium breeds were already reflected in market value and could not rationally be counted again to justify the same valuation. Nor could the higher profits associated with premium stock justify reducing separate stock compensation (paras 49–56).
6. The sliding reduction based on the cessation date was unfair. A draft consultation scheme could not properly be treated as a warning requiring irreversible decisions before the final scheme was made. The reduction also sat uneasily with the valuation assumptions concerning pelt prices and the earlier assurance that decisions need not be taken until November 2001 (paras 57–60).
7. Viewed cumulatively, the defects produced arbitrary variations and unjustified discrimination. The provisions concerning residual breeding value, namely paragraph 2(a) of Schedule 1 and Schedule 3 to the Order, did not comply with common-law or Convention requirements. The precise form of relief, including whether the whole Order or only those provisions should be quashed, was left for further argument (paras 61–65).

First-instance judicial review proceedings. The court found the provisions concerning compensation for the residual value of breeding stock unlawful and deferred the precise terms of the order.