Speciality Produce Ltd v Secretary of State for the Environment, Food and Rural Affairs

Abuse of rights requires both an objective and a subjective element. The court must ask whether the transaction or arrangement, although formally within the legislation, is contrary to the legislation’s purpose and whether its principal aim is to obtain the advantage by artificially creating the required conditions. An arrangement is not abusive merely because the party could have chosen another business structure. The existence of commercial purposes other than obtaining the regulatory advantage defeats the subjective limb. A judicial review court should quash an unlawful decision but will generally avoid substituting its own decision for that of the statutory decision-maker.

The claimant was recognised as a producer organisation under Council Regulation 2200/96. After its central sales function was replaced by divisional marketing arrangements, recognition was withdrawn. The claimant later applied for re-recognition, proposing to restore a central marketing function. The defendant refused the application and subsequently upheld that refusal, contending that the proposed restoration was an abuse under Article 4(3) of Council Regulation 2988/95.

The remaining issue was whether the defendant had correctly rejected re-recognition on that basis. The claimant sought the quashing of the defendant’s decisions and an order requiring recognition.

1. Abuse test. Article 4(3) of Council Regulation 2988/95 requires two questions to be considered. First, viewed objectively, was the principal aim of the act to obtain an advantage contrary to the purpose of the applicable Community legislation? Secondly, viewed subjectively, was the act intended to create the conditions for obtaining that advantage artificially or for no commercial purpose?
2. The purpose of Council Regulation 2200/96 was to establish and promote producer organisations as a beneficial market structure, while avoiding market distortion and inefficient use of Community funds. The proposed central marketing function was capable of actively marketing all members’ produce and could not objectively be regarded as wasteful, unnecessary or contrary to that purpose. It could instead further the purpose of the Regulation.
3. The subjective limb was also not established. The evidence showed genuine commercial reasons for restoring the central marketing function, including changes in market conditions and the potential value of renewed central customer contact. The fact that re-recognition was also sought did not make the arrangement artificial.
4. The availability of alternative business structures does not itself justify treating the selected structure as abusive. A party may choose between different arrangements, subject to the selected arrangement not amounting to an abuse.
5. The defendant’s decisions of 18 July 2008 and 19 March 2009 were quashed. The court declined to order recognition from 1 January 2007 because judicial review is supervisory and the court should not assume the role of the decision-maker. The defendant could reconsider the application promptly in light of the judgment.

Not stated in the judgment.