Court steps in against 'Phoenix' Arrangements in support of Food Standards Agency's remit in meat case

A recent court case, R (on the application of AGRO FOODS (ASHFORD) LTD) v FOOD STANDARDS AGENCY [2019] EWHC 2718 (Admin) looked at the remit and scope of the Food Standards Agency's (FSA's) power under the Meat (Official Controls Charges) (England) Regulations 2009 reg.4 to withdraw official controls from food business operators.  In particular, it found that the power in reg.4 was not confined so as to be available only in respect of a defaulting operator against whom a judgement for unpaid charges had been obtained; it also applied where there was a successor operator.

A company (X) applied for judicial review of the defendant Agency's decision to withdraw official controls.

X was the current operator of a slaughterhouse. In accordance with the food regulation regime, it needed statutory approvals and official controls from the Agency in order to lawfully operate. The Agency was entitled to charge for those controls under reg.3(4). Controls were in place in relation to X's slaughterhouse, but they were withdrawn after the previous operator (C) failed to satisfy a judgement the Agency had obtained for unpaid charges. Under reg.4, the Agency could refuse to exercise any further controls "at those premises" until the judgement was satisfied. C and X had the same director.

The issue was whether the words "at those premises" in reg.4 confined the Agency's power to withdraw controls so that it could only do so where the current operator was the same operator against whom the judgement was entered, or whether the power was unconfined so that, in an appropriate case, the Agency was entitled to refuse to exercise further controls even though there was a successor operator against whom no judgement had been entered.

The court found that Regulation 4 had to be objectively interpreted, starting with the ordinary and natural meaning of the words. As it was a provision relating to charging, a strict approach was appropriate. The court was not concerned with the subjective intention of the drafter, nor was it appropriate to seek to identify the "mischief" at which reg.4 was directed by reference to documents which were not in the public domain.

Meaning of "at those premises" - The ordinary and natural meaning of the words "any premises" and "those premises" connoted the same physical facility where a predecessor operator and a successor operator could each at different times have operated in a way that required official controls. The claimant had argued that "premises" meant "establishment (unit of food business) for which approval had been granted"; so that, "those premises" meant "the approved establishment of the operator against who the judgement was operated". However, reg.4 did not use the words "establishment" or "that establishment", even though the drafter could easily have done so. "Premises" in reg.4 was not conceptually identical to "establishment"; and "those premises" was not conceptually identical to "that establishment" being "the approved establishment of the operator against whom the judgement was entered". "Premises" had a nature which was physical; "establishment" meant something more than premises; it was a "unique three-dimensional entity", (Allan Rich Seafoods v Lincoln Magistrates' Court) [2009] EWHC 3391 (Admin) applied.

If reg.4 were confined in its application to cases where the defaulting operator, against whom judgement had been entered, remained in operation, the Agency would be at the mercy of "phoenix" arrangements by which a controlling person behind a corporate entity could acquire a new corporate identity and insist on the continuation of controls leaving past charges unsatisfied. The new off-the-shelf company could have the same directorship and shareholding as the predecessor, and the arrears could be avoided. Looking objectively, it would be very surprising if the drafter of the Regulations had intended to leave that problem unaddressed. Accordingly, the power in reg.4 was not confined so as to be available only in respect of the defaulting operator against whom the judgement had been obtained; it also applied where there was a successor operator. 

This was therefore an important case for the FSA and illustrates a sensible and practical interpretation of the legislation. 

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