The Civil Division of the Court of Appeal handed down judgment in the case of R (T A Gwillim and Sons) v The Welsh Ministers [2010] EWCA Civ 1048 on the 6 October 2010. The case concerned financial support payments under the common agricultural policy, and changes made to that system by the establishment of a single payment scheme through Council Regulation (EC) No. 1782/2003 (the Regulation), which also provides for “hardship cases” under Article 40.

Payments under the single scheme were calculated by reference to payments made in years 2000-2002. Exceptions to this were provided in Article 40 for farmers "whose production was adversely affected during the reference period by a case of force majeure or exceptional circumstances". Provision was also made for those who "were under agri-environmental commitments".

The respondent had entered into a tenancy for two plots of land, one of which was subject to an agri-environmental agreement which restricted increase in production. The respondent had submitted a request to the appellants that a different two year reference period, 1997-1999, be substituted for the 2000-2002 period on the grounds of agri-environmental commitments. The request was rejected, it later becoming apparent that that decision was based on an approach to Article 40 where adverse affect could only be demonstrated by a dip in production. The respondent successfully claimed for judicial review to the High Court. The appellants obtained permission from that court to appeal the order.

Before the Court of Appeal, the central issue was determined to be the meaning of the phrase “production was adversely affected” in Article 40. On behalf of the appellants it was argued that this only arose where a dip or reduction was proven. The respondent maintained, as held successfully in the court below, that the words encompassed agri-environmental commitments which prevented or restricted an increase in production.

Considering the meaning of the phrase “production was adversely affected” the court agreed with the submission for the appellants that in the context of the instant case, reference must be had to the number of animals eligible for subsidy rather than the land area. Referring however to the case of Davidoff and Cie v Gofkid Ltd [2003] ECR I-389 in example, the court found that the wording of Article 40 and the underlying policy necessitated a broad interpretation. The prevention or restriction of increase in production could be demonstrative of an adverse affect.

Recital 24 of the Regulation sets out that the change to the process will leave actual amounts paid unchanged. Holding that the judge had been correct to rely on this recital the court reasoned that whilst it was impossible that exactly equal payments would be received, an intention of broad equivalence was suggested. This would not be achieved using the appellant’s approach to Article 40.

On the issue of the principle of legal certainty, the court referred to ECJ cases on the regulation, including H.J. Nijemeisland v Minister van Landbouw, Natuur en Voedselkwaliteit (Case C-170/08). These cases held that calculation of a reference point must be consistent with the principle of legal certainty. Consequently Article 40 should be interpreted so that claimants are not unfairly penalised for leasing land which is subject to agri-environmental measures with unforeseeable financial consequences.

Dismissing the appeal, the Court of Appeal ordered that the appellants take a fresh decision on the application. It was emphasised that findings of fact by the High Court on the issue of agri-environmental commitments were not open to reconsideration.