Fintan Duff, Liam Finlay, Thomas Julian, James Lyons, Catherine Maloney, Michael McCarthy, Patrick McCarthy, James O'Regan and Patrick O'Donovan (plaintiffs) v The Minister for Agriculture, Ireland and the Attorney General (defendants).
Damages - Assessment - Minister's mistake of law in not allocating additional quota at outset of dairying enterprise - Additional quota would have allowed plaintiff to treble production - Whether sale of farm due to this mistake - Whether failure to follow farm plan attributable to mistake - Amount to be awarded.
The High Court (before Miss Justice Laffoy); judgment delivered 24 August 1999.
The ninth plaintiff and his wife had been hindered in their ability to increase milk production by the Minister's mistake of law in not allocating to them 13,691 gallons of quota. This in turn had reduced their income and resulted in their inability to control their debts. The sale of their farm, the interest on their loans and various other losses, as well as the consequent hardship and deprivation which they had suffered, were attributable to the Minister's mistake.
Miss Justice Laffoy so held in awarding to the ninth plaintiff £45,924 in respect of loss of income from the additional quota, a further sum (to be calculated) in respect of interest accrued on loans, £45,085 in respect of capital losses, £2,385 in respect of loss of shares in a co-operative, £14,301.56 in respect of superlevy fine liability, and £20,000 general damages.
Frank Clarke SC, James O'Reilly SC and John Gleeson BL for the ninth plaintiff; Mary Finlay SC, Andrias O Caoimh SC and Luan O Braonain BL for the defendants.
Miss Justice Laffoy said that the matter for determination was the assessment of damages to which the ninth plaintiff, Patrick O'Donovan, was entitled as a result of the mistake of law of the first defendant. Mr O'Donovan was a married man with three children. On his marriage in 1979, he had become entitled to a residential holding of approximately 77 acres in Dromerk, Dunmanway, Co Cork. At the time of their marriage, Mr and Mrs O'Donovan were working in Cork as a carpenter and a secretary, respectively.
In early 1981, Mr O'Donovan entered into a farm plan under the Farm Modernisation Scheme. The plan envisaged that the plaintiff would milk 6 cows in 1981, and by 1985, the final year of the plan, he would be producing 28,000 gallons of milk, based on 40 cows yielding 700 gallons per cow. The plan also envisaged that various improvements to the farm, including the construction of various buildings and facilities, and the drainage and reclamation of 40 acres of land, would be made. Between 50 and 60 acres of the land was good quality land.
In order to implement the schedule of improvements and investments provided for in the plan, the plaintiff gave up his trade in early 1981 for one year. His uncle, who was living and working on the farm, died suddenly in June of that year. The plaintiff and his wife, who were still living in Cork, decided to convert to a dry-stock enterprise until the works were completed.
That work was completed in the autumn of 1983, rather than in 1982 as had been planned. In February 1983, the plaintiff's wife gave up her employment and the O'Donovans moved to Dunmanway. They commenced milking with six cows in December, 1983, and in the year 1983 they delivered 122 gallons to their co-operative. When the superlevy regime commenced in April, 1984, they were allocated a quota of 619 gallons based on those deliveries.
From the outset, the farm was encumbered with very heavy borrowings. In 1981, £24,000 was borrowed from the bank to fund improvements, and by the end of 1983, this had escalated to £32,000. In addition, there was a debt of £25,000, secured
by a mortgage on the house. In addition, the plaintiff was in bad health. Since 1985, he had been in receipt of a disability benefit. This disability was attributable to stress.
In 1985/86 the plaintiff was allocated 8,217 gallons of new entrant quota. The only additional allocations to the plaintiff, apart from an aggregate of 1,200 gallons in accordance with provisions to benefit small producers, were an allocation of 4,955 gallons from the Milk Quota Appeals Tribunal in 1992/93 and a further allocation of 20,000 gallons from the tribunal in 1994/95 on the grounds of hardship. Miss Justice Laffoy said that in the years before this latter allocation, the plaintiff was caught in a vicious circle of being inhibited in the amount of milk he could produce because of the quota restriction, which resulted in insufficient income to provide himself and his family with a decent living and to service his debt, which in turn led to the sale of cows. The reduction in stock numbers, in turn, further reduced his ability to produce milk.
The plaintiff delivered almost 15,000 gallons in each of the first three years of the superlevy. He avoided penalty because of the availability of flexi milk. He increased his herd to 23 cows and one in-calf heifer in 1984, and the intention was to increase the herd to 35 cows. His herd decreased in the next two years, going down to 15 cows in 1986/87. In 1987/88 the plaintiff, with the aid of a £10,000 loan, increased his numbers to 28 and delivered over 22,500 gallons of milk. However, just as the situation looked brighter, the plaintiff incurred a superlevy penalty of £14,301.56, which still remained due.
After the imposition of the penalty, the plaintiff's milk production declined, going as low as 14,770 gallons in 1993/94. His herd size also decreased. Further superlevy penalties were avoided by the acquisition of additional quota: in 1988/89 and 1993/94, the plaintiff acquired the maximum allocation available in his catchment area under the relevant restructuring schemes, i.e., 3,000 gallons in total, and between 1988/89 and 1991/92, the plaintiff leased between 8,000 and 9,000 gallons of quota each year.
The allocation of 4,955 gallons by the tribunal in 1992/93 did not make up for the loss of the leased quota and the decline in production continued. The allocation of 20,000 gallons by the tribunal in 1994/95 turned the enterprise around somewhat and both cow numbers and production increased. However, by 1996, apart from ordinary trade creditors, the plaintiff's indebtedness to financial institutions stood at £125,000. The final blow
was the unfavourable decision given by the European Court of Justice in these proceedings in February 1996. It was one crisis and disappointment too many for the O'Donovans and on the advice of their GP, they decided to sell the farm. The farm of 74 acres with quota of 36,732 gallons was sold in late 1996 for £240,000. The house and the three acres surrounding it were sold the following year for £60,000.
Miss Justice Laffoy said that on 16 June 1999, she had ruled that the plaintiff should have been allocated 13,691 gallons of quota initially, that amount being based on the formula set out in her previous judgment of 25 March 1999. The 13,691 gallons was 50 per cent of the difference between his targeted milk production for the end year of his plan, ie 28,000 gallons, and his initial quota of 619 gallons. (The new entrant quota of 8,217 gallons was not to be taken into account.)
Miss Justice Laffoy dealt with the plaintiff's claim for compensation under various headings as follows.
Additional milk production
The quota available to the plaintiff and the volume of his milk production were quite different to what they would have been had the plaintiff been allocated 13,691 gallons initially. That allocation would have enabled him to almost treble his production, if he was totally reliant on allocated quota. On the other hand, had he been allocated that amount from the outset, he would not have received the allocations of 4,955 and 20,000 gallons given him from the national reserve. Miss Justice Laffoy said that the plaintiff had planned for 35 cows in 1984 and 1985. His production in those years was between 683 and 782 gallons, but in the more stable environment which an additional 13,691 gallons would have created, a yield of 800 gallons should have been achievable. She therefore envisaged that 24,000 gallons would have been produced in 1984/85, based on 30 cows each yielding 800 gallons. This would have exceeded quota, but the plaintiff would have been able to rely on flexi milk. He would have been able to acquire more cows by selling a site.
Miss Justice Laffoy said that from 1985/86 to 1987/88, production would have increased to 28,500 gallons, based on 30 cows. The excess over quota could have been produced by reliance on flexi milk. However, in the year 1987/88, Ballyclough Co-op was subject to a superlevy penalty. The plaintiff's liability would have been £3,672.
In 1988/89, the plaintiff's production would have increased to 32,000 gallons and would not have dipped below that level in subsequent years. This could have been achieved with little or no outlay on stock. Miss Justice Laffoy said that this calculation assumed that the plaintiff would have acted in the same way to acquire extra quota, and would have acquired extra quota under the restructuring schemes then in force in his catchment area, and that the plaintiff would have ceased to rely heavily on flexi milk.
Miss Justice Laffoy said that there was no doubt that the farm had the capacity to produce milk to this level. It was the plaintiff's wife who effectively was the farmer. Miss Justice Laffoy said that she had no doubt that these levels of production could have been achieved under her management, together wish such assistance as her husband could give. That was suggested by the level of production actually achieved, from what was almost a "start-up" position, after the allocation of 20,000 gallons of quota in 1995/96. In calculating the levels of production in the various years, it had been considered that quota would not be readily available, given that the plaintiff would not have had the resources to acquire quota by buying land, and that less restructured quota would have been available had quota been allocated according to the model in the judgment of 16 June 1999. Miss Justice Laffoy calculated the loss attributable to lost additional milk production at £45,924.
Financial loss resulting from shortfall of livestock other than cows
The plaintiff had claimed that because of the general lack of finance by reason of the non-availability of the additional income, he was not able to fulfil his plan and there was shortfall of livestock other than cows, as against the numbers planned. The plaintiff claimed £16,019 for the loss of income arising from this shortfall. Miss Justice Laffoy said that she would take into account, as she had in considering the claims of some of the other plaintiffs, that in order to accommodate the extra cows envisaged by the plan, the plaintiff would have had to forego some of the livestock units and some of the hay which was or should have been produced on the farm. She said that when one analysed the records from the outset of the dairy enterprise, it was obvious that the shortfall was attributable to financial inability to fund stocking which was anterior to the introduction of the superlevy regime. This was due to the level of debt incurred by the plaintiff before the superlevy regime commenced. More significantly, the additional income, which would have been generated by the availability of extra quota, would have been used to repay the debt and to improve the O'Donovans' living conditions. Accordingly, this claim failed.
Interest
Miss Justice Laffoy allowed a sum to be calculated in the manner indicated in an Appendix to her judgment in respect of the interest which the plaintiff would have saved on his indebtedness to financial institutions, if he had been the recipient of the additional income from the additional production attributable to the additional quota.
Capital and other losses: sale of farm, stock, machinery
The plaintiff claimed that because he was deprived of this additional income, he had had to sell his farm. He claimed compensation on the following basis:
(a) the difference between the current market value of the farm and the price realised on the sale, taking into account however that the sale price had been enhanced by virtue of the fact that the quota attached to the farm (36,732 gallons) was more than would have been attached had the Minister not made the mistake of law (27,414 gallons);
(b) the costs at current prices of restocking the land to create a dairy farm of 30 cows and to equip it with the necessary machinery;
(c) the loss of the income which would have been generated by the farm since its sale to date and lost income projected into the future for a reasonable period (say, two years) until the farm would be up and running again.
The Minister claimed that the dairy farm was doomed to failure from the beginning, because of the burden of debt, which it carried. That debt was due to the O'Donovans' family circumstances, the delay in implementing the plan and other causes. The issue for the court was not to identify the cause or causes of the deterioration of the O'Donovans' financial position. It was to determine whether the additional income which Miss Justice Laffoy found the additional production from the additional quota would have yielded, would have alleviated the financial situation sufficiently to stave off the eventual sale in 1996/97. Miss Justice Laffoy said that the appropriation of the additional income in reduction of the debt and the interest thereon would have been bound to contain the exponential growth of the debt. The plaintiff's inability to keep the debt within acceptable bounds was due to insufficient income, which was due to his inability to increase his milk production. A causal link had been established between the sale of the farm and the Minister's mistake of law.
The Minister's wrong was in the nature of a tort, and the principle of restitutio in integrum applied to the calculation of compensation. She therefore rejected the Minister's argument that in the absence of any evidence of an intention on the part of the plaintiff to resume farming, he was only entitled to be compensated for the reduction in the value of his capital assets by reason of the sale. He was entitled to an amount of money which would put him in the same position as if he owned a 74 acre, 30 dairy cow farm at Dromerk with a 27,414 gallon milk quota, less the sale proceeds. The farm would be worth £40,000 more today, but its value on sale had been enhanced by additional quota worth £27,000. Miss Justice Laffoy accordingly valued the loss to the plaintiff at £13,000. No compensation was given in connection with the sale of the dwelling house or of a site which had also been sold, since the sale of the farm was sufficient to discharge the debts, and the replacement house purchased had appreciated in value. Miss Justice Laffoy awarded £17,500 for the difference between the sum realised on the sale of 34 cows in 1996 and the sum required to purchase 30 cows today, and to cover the price of a second-hand tractor. She also awarded £14,585 in respect of the transaction costs on the sale of the farm.
No sum was allowed for loss of income for the period since 1 April 1997, because the plaintiff was being compensated under a separate head in respect of the interest savings which the additional income would have achieved. The plaintiff had had the actual net proceeds of sale since the completion of the sales transactions in 1996. In addition, interest at the court rate on the compensation in respect of capital losses of £45,085 was allowed from 1 October 1996 to the date of judgment. The plaintiff had restitution in integrum as of the date of judgment, and there was no basis for compensation for future loss of earnings.
Dairygold shares
It was common case that the plaintiff would have become entitled to 2,385 extra shares in Dairygold Co-operative by reason of his additional production and his additional trading with the co-operative over the years from 1984/85 to 1996/97. On the evidence it was not probable that the corporate status of Dairygold would change in the short to medium term. Miss Justice Laffoy allowed £2,385 in respect of this loss.
Superlevy fine
Miss Justice Laffoy calculated the superlevy fine which the plaintiff would have incurred in 1987/88 at £3,672. This sum, together with the sum of £14,301 plus capped interest which remained due to Dairygold, was awarded to the plaintiff.
General damages
Miss Justice Laffoy said that it was absolutely clear on the evidence that the plaintiff and his family had endured an extreme degree of hardship and deprivation which could have been alleviated, if not eliminated entirely, if the Minister had not made the mistake of law. It was also clear the plaintiff's emotional health had been adversely affected and that this impacted on his physical health. Miss Justice Laffoy allowed £20,000 in respect of general damages.
Solicitors: Lavelle Coleman (Dublin) for the ninth plaintiff; Chief State Solicitor for the defendants.
