Pease & Anor v McMillan & Ors

A contractual obligation to procure the transfer of agricultural subsidy benefits may encompass the whole of a single payment, including a historic element calculated by reference to earlier subsidy receipts. A clause need not itself satisfy the regulatory formality for transfer. It may create an enforceable obligation to use reasonable endeavours to comply with a reasonable request, with an appropriate later document supplying the required stipulation or modification. Liability arises only where the buyer makes and proves a reasonable request and the seller fails to use reasonable endeavours in response. An appeal cannot succeed on an unpleaded request or an evidential basis not examined at trial.

The purchasers of a farm appealed against the dismissal by Mr Recorder Akast in the Cambridge County Court of their claim for damages. The claim alleged breach of a contractual clause requiring the sellers to use all reasonable endeavours to procure the transfer of agricultural subsidies and single farm payments for the 2005 and subsequent harvest years.

The central issues were whether the clause included the historic element of the single payment scheme and whether the purchasers had made a reasonable request which the sellers had failed to pursue. The Court of Appeal also considered proposed requests made in May 2005 and February 2007.

1. Disposition. The appeal was dismissed. The Recorder was wrong to construe the contractual clause as excluding the historic element, but the purchasers had not established any breach because no actionable reasonable request had been proved.
2. Construction. The clause covered all single farm payments properly attributable to the property. That included the historic element, although its amount was calculated by reference to subsidy receipts in earlier years. The payments themselves were payable for the 2005 and subsequent harvest years, so the provision dealing with subsidies for earlier years did not exclude them.
3. Regulatory compliance. The clause was not itself a stipulation complying with art 17 of the Commission Regulation (EC) No 795/2004. It nevertheless created an enforceable obligation to use reasonable endeavours to comply with a reasonable request. An appropriate document executed under that obligation could constitute a stipulation or contractual modification for the purposes of art 17. The regulation was concerned with the substance of whether the holding was sold together with the relevant payment entitlements.
4. Reasonable request. The obligation arose only when the purchasers reasonably requested action. They had to allege and prove both a reasonable request and a failure to use all reasonable endeavours in response. The May 2005 approach did not establish an unreasonable refusal. The February 2007 proposal was not advanced as part of the trial case and there was no evidential basis on which its reasonableness could be assessed.
5. Direct payment. David Richards J expressed considerable doubts about whether the clause required the sellers simply to account to the purchasers for payments received instead of procuring a regulatory transfer. He considered the issue unnecessary to decide. Lord Justice Lloyd agreed. Lady Justice Arden did not share those doubts, but agreed that the point should remain open.

1. Court of Appeal (Civil Division) — appeal against the Cambridge County Court order dismissed: [2009] EWCA Civ 258.
2. Cambridge County Court — Mr Recorder Akast dismissed the purchasers’ claim on the construction issue by order dated 20 October 2008.