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Supreme Court of Ireland Decisions
You are here: BAILII >> Databases >> Supreme Court of Ireland Decisions >> HMIL Ltd. v. Minister for Agriculture and Food  IESC 3 (24 January 2002)
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case has a very long history dating back to 1988. It arises out of the
operation by the defendant (hereafter “the Minister”) as the
intervention agent in Ireland of the European Economic Community of two schemes
relating to the storage and export of meat. The plaintiffs, who were at the
time engaged in the export of beef to a number of countries, including
destinations outside the EEC, received sums from the Minister under both schemes.
first scheme was the Aid for Private Storage scheme (“APS”). The
second scheme was the Export Refund scheme. Both schemes were intended to ease
the problems encountered by beef producers arising out of the surplus of beef
in the community. Under the APS scheme, payments at a specified rate were made
to persons who kept beef in storage for a certain period. In contrast to the
intervention schemes also operated by the Minister on behalf of the EEC, the
beef in storage remained the property of the person concerned and could be
disposed of by him at the end of the storage period. Under the Export Refund
scheme, the Minister paid to a person exporting beef to specified territories
outside the EEC the difference between the market prices of beef sold within
the EEC and the lower market prices obtainable in the specified areas. Advance
payments were made by the Minister to the person concerned who was required to
furnish certain securities to the Minister.
the 1988 season, the plaintiff was paid a sum of £5,344,605.11 under the
APS scheme and £16,270,139.96 under the Export Refund Scheme. Following
the carrying out by the Minister of a sampling exercise of the beef products
stored by the plaintiff in respect of which such payments had been made, the
Minister informed the plaintiffs that, because of what was said to be a failure
to comply with the regulations governing the scheme, disallowances of a total
of £240,021.03 in respect of the APS scheme and £1,135,957.93 in
respect of the Export Refund scheme were being made and the relevant securities
were also being forfeited.
plaintiffs thereupon instituted these proceedings in which they claimed
declarations that the Minister’s purported disallowance of these sums and
forfeiture of the securities were invalid and damages for negligence and breach
of duty. Those proceedings came on for hearing in due course before the High
Court (Barr J).
a reserved judgment delivered on the 8th February 1996, the learned High Court
judge granted the declarations sought and also found that the plaintiff was
entitled to damages in respect of the negligence and breach of duty of the
Minister. From that decision, the Minister appealed to this court.
the end of a hearing which lasted 5 days, this court decided that the
determination of the issues between the plaintiffs and the Minister raised
questions as to the interpretation of certain EEC regulations and, accordingly,
pursuant to the then Article 177 of the Treaty of Rome, referred those
questions to the Court of Justice of the European Communities for a preliminary
ruling. The further hearing of the appeal was adjourned until after the Court
of Justice gave its ruling on these questions.
30th November 2000, the Court of Justice delivered its preliminary ruling on
the questions referred by this court. It was submitted on behalf of the
Minister that, in the light of the answers to the questions as set out in the
judgement of the Court of Justice, the appeal of the Minister should be allowed
in its entirety. It was submitted on behalf of the plaintiffs that, while in
the light of those answers the Minister was admittedly entitled to succeed in
respect of some of the grounds of appeal set out in his notice of appeal, the
appeal should be dismissed insofar as it related to the remaining grounds and
the action remitted to the High Court for the assessment of damages.
the central issue in the case was as to whether the Minister was entitled to
make the disallowances in question and to forfeit the securities because of the
failure of the plaintiff to comply with the relevant regulations, it is at this
point necessary to consider in more detail the nature of the alleged breaches.
Regulations (EEC) No. 2675/88 governed the operation of the APS scheme.
Article 4(4) of those regulations provided that
2 (2) of those regulations provided
regulations governing the Export Refund scheme were Commission Regulations
(EEC) No. 1962/82. Article 1 provided that
6 provides that
the 1988 season, the plaintiff entered into 138 private storage contracts
pursuant to Regulation No. 2675/88 in respect of approximately 13,000 tonnes of
beef. As already noted, it received £5,376,259.13 under the APS scheme in
respect of those contracts. The storage was not carried out directly by the
plaintiff, but by a number of different subcontractors. The plaintiff applied
for export refunds under the Export Refund scheme pursuant to regulation No.
1964/82 in respect of the same 13,000 tonnes of beef and, as already noted,
received £16,270,139.96 in respect of such refunds.
beef could be kept in storage for up 9 months. Between April and September
1989, the Minister and the Revenue Commissioners carried out examinations of
cartons of de-boned beef to which the two schemes applied in order to ascertain
whether there had been compliance with the terms of the regulations. Among the
cartons examined were 2,400 cartons of beef being stored by the plaintiff. The
results of the examinations showed that, in seven of the production plants
operated by subcontractors acting for the plaintiff, some of the
plaintiffs’ cartons included scraps or trimmings which had not been
individually wrapped and also included fat, alleged by the Minister to be cod
cuts of meat in question were what are described as “plate and flank or
mid-rib” and, in the case of the cartons in question, these trimmings or
scraps, instead of being individually wrapped ,were included with the plate or
flank before the cut was wrapped in polythene.
a sample only of the cartons was examined by the Minister’s officials,
the sampling results were extrapolated across the total plate, flank and
mid-rib production at each of the production units of the plaintiff, separate
calculations being made for each unit. The manner in which that extrapolation
exercise was carried out is of importance and will be considered in more detail
at a later point. The amount of the disallowances made by the Minister were
calculated by reference to the results of the extrapolation.
already noted, in respect of both the APS scheme and the Export Refund scheme,
the Minister called in the securities provided by the plaintiff to guarantee
the performance by it of its obligations under the scheme.
evidence in the High Court established that the plate and flank cuts were
recognised internationally in the beef trade as the cuts of lowest value. They
were sold to the ultimate consumer as mince meat, beef burgers, sausages,
salami and other low quality meat products. The evidence of Mr. John Quinn,
the managing director of the plaintiffs at the relevant time was that, while
these cuts were being prepared for packaging, small portions or
“trimmings” were left on the table. Such trimmings were perfectly
fit for human consumption and he did not regard them as “scraps”
within the meaning of the regulations which could not be included in the cuts
being packaged for storage or export, as would be the case with trimmings which
fell on the floor during the process or with cartilages, tendons, etc,. Since
the meat would ultimately reach the consumer, not in the form of an
identifiable cut such as sirloin or fillet, he considered it a pointless
exercise to wrap these trimmings individually, however small they might be.
Quinn conceded, however, that this to his knowledge was not the interpretation
adopted by the Minister’s officials of the relevant regulations. He
accordingly did not disclose to the Minister’s inspectors that the plate
and flank cuts, as individually wrapped in the different plants, included these
trimmings which, under the department’s construction of the regulations,
should have been individually wrapped,
evidence was given on behalf of the plaintiff, and not challenged on behalf of
the Minister, that the practice adopted by the plaintiff accorded with a long
established practice in the Irish meat trade and that it was also followed in
other beef producing countries, such as Argentina, France and Italy.
the 17th May 1991, Ms. Mary Harvey, an officer of the Minister, wrote to the
plaintiff a letter in which she conveyed the Minister’s decision to make
certain disallowances in respect of both the APS scheme and the Export Refund
scheme as it affected the plaintiff. She explained that the following criteria
had been adopted by the Minister in calculating the amount of the disallowances:
Minister had, in addition, adopted a practice of treating any trimmings less
than 100 grams in weight as scraps and only trimmings in excess of 100 grams as
requiring individual wrapping. It was acknowledged on behalf of the Minister
that this approach was not expressly authorised by the regulations and was
devised by the Minister's officials themselves.
trial judge concluded that, in the light of the fact that the plate and flank
cuts were not sold as such but reached the ultimate consumer in the form of
mince meat, hamburgers, etc., and of the general practice in the Irish and
international meat trade, the edible trimmings should not have been regarded as
“scraps” nor should the regulations have been interpreted so as to
impose on the plaintiff the obligation individually to wrap all trimmings.
was also of the view that the Minister has not discharged the onus which rested
on him of proving on the balance of probabilities that the pieces of fat
discovered in April 1989 on the first day of sampling was, “ cod
fat” which should have been removed in the abattoir before weighing in,
but was more probably “rose fat”.
to the methods of calculation employed by the Minister in determining the
amount of the disallowances and the extent of any forfeiture of the securities
which should follow from the alleged breaches of the regulations, the trial
judge found that, while the Minister was entitled to adopt a sampling and
extrapolation procedure, the adoption by him of the 100 gram level for
distinguishing between scraps and trimming and the 3 kg threshold for
determining whether the entire weight of a carton should be taken into account
in the extrapolation exercise was not authorised by the regulations. The trial
judge was of the view that the individual box was not the appropriate unit for
measuring financial corrections: the Minister should have taken the
individually wrapped parcel of meat as the appropriate unit.
the result, the trial judge found that the financial disallowances and the
forfeitures imposed by the Minister on the plaintiff were not authorised by the
regulations and, in the light of what he considered to be their penal nature,
were disproportionate. He was also of the view that the Minister had been
negligent in adopting a system of financial corrections which his own officials
perceived to be “fundamentally flawed” and that the plaintiffs were
entitled to damages for the negligence and breach of duty so found.
Minister having appealed from the judgment and order of the High Court, this
court, as already noted, on the oral hearing of the appeal, decided to refer a
number of questions to the Court of Justice for a preliminary ruling. I now
set out those questions and the answers thereto of the court.
behalf of the Minister, Ms. Mary Finlay SC., submitted that, in the light of
the answers of the Court of Justice, the appeal should be allowed. She said
that the case in the High Court, and the judgment in favour of the plaintiff in
that court, had proceeded on what had been found by the Court of Justice to be
an entirely erroneous construction of the regulations. The Minister was
correct in construing the regulations as not permitting trimmings from these
cuts to be treated as scraps and also requiring them to be individually
wrapped. The court had also made it clear that it was within the power of the
competent authority of the member state, i.e., the Minister, to adopt a
procedure under which trimmings which were less than 100 grams in weight could
be treated as scraps and did not require to be individually wrapped.
to the 3 kg threshold, Ms. Finlay submitted that it was clear from the answers
given by the Court of Justice that the Minster was correct in treating the
individual carton as the appropriate unit, rather than the individual parcels,
in determining whether there had been compliance with the regulations. It was
also clear from those answers that, in the case of any carton where there had
been any degree of non compliance with the requirement as to the individual
wrapping of trimmings, the Minister was entitled to hold that the entire
contents of the carton did not qualify either for the export refund scheme or
the APS scheme. It followed that the 3 kg threshold adopted by the Minister
was in ease of the plaintiff: if the Minister had done what the Court of
Justice said he was entitled to do, on the proper construction of the
regulations, a significantly greater quantity of cartons would have been held
dis-entitled to payments under either scheme.
to the various criticisms which had been made of the system of extrapolation
and which had found favour with the trial judge, Ms. Finlay, submitted that, in
the light of the answers given by the court that, where there had been a
deliberate and persistent policy of infringement of the relevant regulations,
the Minister was entitled to extrapolate the results of those checks across the
production of the production plants in question, Ms. Finlay submitted that such
criticisms as were made were now of no significance. The evidence on behalf of
the plaintiff itself in the High Court had been that there was a deliberate
policy on its part to contravene the regulations and, in the result, the
extrapolation procedure adopted by the Minister could not be said to have been
in any way unfair to the plaintiff.
to the disallowance of cartons on the basis that they contained cod fat, Ms.
Finlay submitted that the regulations made it clear that, although advance
payments could be made to the plaintiff, it was for the plaintiff to satisfy
the Minister that there had been compliance with the regulations which entitled
it to the payments in question. At the least, the evidence established that
the Minister was entitled to hold that, in the case of the cartons in question,
the plaintiff had not established that it was entitled to the relevant
behalf of the plaintiffs, Mr. Paul Sreenan SC and Mr. Rory Brady SC submitted
that it was clear from the judgment of the European Court that it was for the
national court to establish whether, in the present case, the sampling actually
adopted by the Minister was sufficient and reliable and whether the
extrapolation method was valid. They submitted that the finding of the High
Court that the checks were not sufficient and reliable and that the
extrapolation method employed was invalid, was based on credible evidence and
should not be set aside by this court on appeal.
was further submitted that, since the methods adopted by the Minister had not
been notified to the plaintiff in advance but had been devised by him at a
subsequent stage, it had no legal basis in domestic law and the result
constituted an unlawful penalty imposed by the Minister on the plaintiff
without statutory authority and in breach of the rules of legal certainty.
was further submitted that, having regard to the admitted difference between
the plate and flank cut and the mid-rib cut, the Minister was not entitled to
combine these two cuts for extrapolation purposes.
was further submitted that the answers of the European Court of Justice to the
questions were preconditioned on evidence of “a deliberate and persistent
policy of infringement”. The High Court had not found that such a policy
was in existence: it had made it clear that the policy to wrap “lean
trimmings” in plate and flank arose from the plaintiff’s bona fide
interpretation as to what the regulations meant and, it was urged, this was
not an unreasonable interpretation in the circumstances of the regulations.
was further submitted that, while the findings of the Court of Justice upheld
the possibility for extrapolation, this did not relieve the Minister from the
obligation of putting in place a statistically reliable form of sampling and
extrapolation and this had not been done. It was also submitted that the
finding of fact by the High Court that cod fat was not in fact found by the
Minister during the sampling exercise was one which could not be overturned by
was further submitted that the system of financial corrections adopted by the
Minister failed to take into account the fact that the aid scheme was premised
on a maximum de-boning yield of 75%. In the event, a 2% excess yield had been
obtained by the plaintiff, but this had been ignored and some credit should
have been allowed in that regard. This had not been made the subject of any
finding by the Court of Justice.
was further submitted that the operation by the Minister of the 3 kg threshold
and the failure by him to recognise the difference between the plate and flank
and mid-rib cuts had resulted in this case in the infliction of penalties which
were disproportionate. It was also submitted that the defects in the
methodology adopted by the Minister were such as to justify a finding by the
High Court that the Minister has negligently exercised his powers.
to the delay on the part of the Minister in releasing the securities, it was
submitted that there was no appeal from the finding that the Minister had an
obligation to act without delay, that he had not acted without delay and that
as a result loss had been sustained by the plaintiff in servicing the securities.
reply, Ms. Finlay submitted that the evidence clearly established that in
practical terms, so far as the contracts at issue in these proceedings were
concerned, there was no distinction between the plate and flank cuts and the
mid-rib cut and that, in the result, the Minister was fully entitled to
extrapolate the results of the sampling across the production of all three
to the claim based on delay, she submitted that the evidence of the relevant
department official had been that, although the securities had not been finally
released until the 10th December 1993, while the case was at hearing, if the
plaintiff’s entitlement to have the securities released had been
determined in May 1991, the plaintiff would have been required to pay a further
sum of £1.1 million.
learned High Court judge in this case was concerned with what he saw as a rigid
and literal interpretation of the EEC Regulations by the Minister, which he
described as “an exercise in bizarre bureaucracy of ultimate
absurdity”. In particular, he regarded the requirement that trimmings
from the plate and flank cut should be individually wrapped as creating wholly
unnecessary problems for the exporter, the purchasers and others.
is an understandable view. However, the fact remains, as the evidence in the
case made clear, that these requirements reflect the huge quantities of meat
which were the subject of the relevant schemes and the significant community
funds which were being made available to the exporters. Meticulous adherence to
the requirements of the regulations as to the packaging and labelling of
individual cuts of meat was clearly regarded as of paramount importance in
order to prevent wholesale evasion of the requirement that only cuts of meat of
a particular quality, separately packaged and labelled, attracted the payment
of the significant sums by way of subsidy involved.
considerations are, however, now
because the preliminary ruling by the Court of Justice, which must, of course,
be given full and unreserved effect by this court, has made it clear that the
interpretation by the learned High Court judge of the relevant regulations in
this context was erroneous. The relevant paragraphs of the judgment of the
court state as follows:
problem undoubtedly arose from a strict adherence to the regulations: a
requirement that every trimming, however small, should be individually wrapped
would be clearly impractical and might even defeat the object of the
regulation. It was in that context that the Minister adopted the policy of
excluding from entitlement to special export refunds trimmings the weight of
which was less than 100 grams and excluded such trimmings from the APS scheme.
The operation by the Minister of both schemes in accordance with those criteria
has now been expressly approved of by the Court of Justice as a proper
interpretation of the relevant regulations.
to the threshold limit of 3 kgs which was adopted by the Minister, following
discussions with the EEC Commission, and as a result of which boxes containing
in excess of that amount of unwrapped trimmings were treated as ineligible
under the APS scheme or the Export Refund scheme, the position is as follows.
It is clear from the answers given by the Court of Justice to the questions
referred by this court that, where a carton contains trimmings which are not
individually wrapped or separate pieces of fat, the entire contents of the
carton may be held to be ineligible under both schemes. (As has been seen, the
High Court judge erroneously treated the individual parcels as the appropriate
unit for this purpose). The adoption by the Minister of the 3 kg threshold
was, accordingly, more favourable to the plaintiff than the approach he would
have been entitled to adopt under the regulation as interpreted by the Court of
Justice. It was beyond argument that, if the Minister had adopted the more
stringent interpretation of the regulations now found appropriate by the Court
of Justice, a significantly greater quantity of cartons would have been treated
as ineligible as a result of the extrapolation exercise.
to the extrapolation exercise itself, the Court of Justice in its judgment and
in the answers furnished to the question referred by this court makes it clear
beyond doubt that such an extrapolation exercise was perfectly legitimate. It
was criticised on a number of grounds, but, in the light of the candid evidence
of Mr. Quinn that a policy had been adopted of including the lean trimmings in
the wrapped up parcels of flank and plate, because of a disagreement with the
department as to the correct interpretation of the regulations, the result of
the extrapolation exercise could not have been in any way unfair to the
plaintiffs: particularly in the light of the adoption by the Minister of the 3
kg threshold, the overwhelming probability was that it erred on the side of
generosity to the plaintiff.
is accordingly, unnecessary to consider in any detail the defects alleged to
have existed in the sampling procedure. Since, however, much emphasis was laid
upon it in the written and oral submissions of the plaintiff, it should be
pointed out that the contention that the Minister's extrapolation procedures
were flawed because it treated the mid-rib cut on the same basis as the plate
and flank cuts does not appear to have been borne out by the evidence. As Ms.
Bridget Cannon, the officer of the department who gave detailed evidence on
this matter pointed out, the tables showing the boneless yield by the plant, as
broken down between the mid-rib and the plate and flank, indicated in one
instance that there had been no yield from the mid-rib, but a 35.4 total yield
from the plate, flank and mid-rib. That was clearly consistent only with the
plate and flank being treated on the same basis by the plaintiff as the mid-rib.
to the claim that the Minister had devised the methodology of extrapolation
and that this offended both domestic law and EEC law since it was lacking in
legal certainty, it is clear that, while the Minister was entitled to make
advance payments to exporters such as the plaintiff, the obligation was
entirely on the plaintiff to satisfy the Minister, as the agent of the EEC,
that all the requirements of both schemes had been complied with when the beef
was ultimately exported to the third countries concerned. When the
Minister’s officials encountered evidence of non-compliance on a
significant scale with the requirements of the regulations, they were clearly
entitled to put in place a sampling and extrapolation procedure in order to
determine the probable extent of the non compliance. Nor, in the context of
the overall payments made to the plaintiff in respect of both schemes, could
the disallowances and forfeiture of the securities be regarded as a
disproportionate response to the violation of the regulations which was
involved. Since the findings by the High Court that the Minister had been
negligent and in breach of duty in the manner in which he had conducted the
sampling and extrapolation exercise were based on an erroneous interpretation
of the regulations, it also follows that the plaintiff was not entitled to
succeed in the claims brought by it under that heading.
the question as to whether cod fat was present in some of the cartons sampled
was canvassed at some length both at the hearing in the High Court and on the
appeal, it appears in fact not to have been a matter of any great significance.
There was undoubtedly evidence as to the presence of individual items of fat -
whether cod fat or rose fat - and that, of itself, irrespective of whether it
was properly described as cod fat, would have entitled the Minister to reject
the entire of the carton concerned and to use that as a basis for extrapolation
across the rest of the production.
is also no doubt the case that the scheme was premised on a maximum de-boning
yield of 75% . However, the suggestion that the 2% excess yield achieved by
the plaintiff should have been taken into account in calculating the
disallowance in respect of the APS scheme is unsustainable. Since the
calculation of the disallowances which had to be made in respect of the APS
scheme was, on the findings of the Court of Justice, over generous to the
plaintiff, there is no basis for the suggestion that it should have been given
credit for the 2% excess yield which the plaintiff had achieved.
remains the question of delay in the release of the securities. The oral and
documentary evidence on this matter in the High Court was voluminous. It
established beyond doubt that, given that the securities could not be safely
released by the Minister until the exporting procedures had been fully complied
with and all the necessary proofs to that effect furnished to the department,
there was, as indeed was conceded on behalf of the plaintiff, an inevitable
delay in obtaining the release of the securities. As to whether the delay in
the present case is excessive, the following exchange in the course of
cross-examination of Ms. Cannon is of significance:
the light of that unequivocal evidence that a decision in May 1991 would only
have been taken on the basis that the plaintiff refunded £1.1 million to
the Minister - and, while it was suggested that this might subsequently have
been reassessed by the department, it was not claimed that Ms. Cannon’s
evidence on this matter was other that perfectly truthful - there was no basis
for a finding that the failure by the Minister to release the securities before
December 1993 was wrongful.