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1. MR JUSTICE LAWS: These are two Notices of Motion, made respectively within two sets of conjoined judicial review proceedings, in which the applicants seek declarations that they are entitled to interest on certain payments made by the respondent ministry following a preliminary ruling of the European Court of Justice given on 17th July 1997.

2. Council Regulation 3508/92 established an integrated administration and control system for certain European Community aid schemes, within the Common Agricultural Policy, relating to the crops sector and the livestock sector. The aid scheme for arable crop producers was established by Council Regulation 1765/92. Regulation 3508/92 has been described as "the base regulation" and provides, as it were, for the strategy by which the aid schemes are to be administered. The schemes, certainly that relating to arable crop producers, involve what are known as "set-aside" grants or payments. It is not I think necessary, for the purposes of the issues I must decide, to go into the detailed provisions of these regulations. It is enough to notice that if an applicant for aid follows and fulfils the detailed rules to which entitlement to the grant or grants is made subject, he has a settled legal right to the appropriately calculated amount and there is no discretion in the UK authority charged with administering the scheme (the respondent ministry) whether or not, or how much, to pay.

3. Article 9 of Regulation 3887/92 laid down penalties for overstating the area of land in respect of which aid is claimed. Serious negligence or fraud would disqualify a claimant altogether; but I should make it clear that there is no question of anything of that kind in these cases. In the first judicial review application, brought by Lower Burytown Farms Limited, the applicant, in his claim for set-aside grant, had made a genuine mistake claiming two fields as set-aside when in fact they did not qualify under the rules. This exposed the applicants to penalties or sanctions under Article 9. Article 9(2) (second paragraph) provided that where the difference between the area claimed and the area actually determined is more than 20% of the determined area "no area-linked aid shall be granted". The mis-declaration by the applicants meant that the difference in their case was 33.89%. Relying on Article 9(2) the respondent refused payment, not only on the remaining land of the applicants which was correctly put forward as set-aside, but also in respect of other claims for aid made by the applicants in relation to cereals, oilseeds and maize. That was because the respondent construed Article 9(2) so that the whole area claimed for each arable crop (including set-aside land) was to be disqualified from aid. The applicants' interpretation of Article 9(2) was that the individual agricultural parcel of land whose area was overstated was what, alone, fell to be considered. That interpretation, of course, was much more favourable to the applicants than that adopted by the respondent and, if it were right, the sanctions imposed by way of deduction from the aid to which the applicants would (but for the mis-declaration) be entitled would be much less severe.

4. It is not I think necessary to go further into the facts of that case, or at all into the facts of the other judicial review. In both cases, the applicants sought judicial review in order to challenge the respondent's interpretation of Article 9(2) of Regulation 3887/92. Article 9(4), which I need not set out, was also in play. Both sets of proceedings came before McCullough J, who on 31st October 1995 ordered a reference under Article 177 of the EC Treaty seeking a preliminary ruling from the Court of Justice upon five questions concerning the construction and validity of that Regulation.

5. The Court of Justice upheld the respondent's interpretation of Article 9(2) of Regulation 3887/92. However that was by no means the end of the matter. By Regulation 1648/95, Regulation 3887/92 was amended. The effect, in particular of the amendment to para 9(4), was to provide for reduced penalties where the farmer had committed an innocent error in declaring his set-aside area in his application for aid. But this amendment entered into force after the relevant decisions by the respondent in these cases.

6. I should notice that in upholding the respondent's interpretation of Article 9 of Regulation 3887/92 the Court of Justice held (paras 33 and 34 of the judgment) that the amendments introduced by Regulation 1648/95 took (in effect) that very interpretation as a premise; and ameliorated its effects.

7. In fact Regulation 1648/95 in the result played a critical part in the outcome of the Article 177 reference. In order to explain how that came about it is convenient first to set out para 36 of the Court's judgment:

8. Regulation 2988/95 entered into force on 26th December 1995 - two months after McCullough J had ordered the reference. Article 2(2) provides:

9. Thus in the upshot issue was joined in the reference proceedings, effectively at the invitation of the Court of Justice, as to whether the effect of Article 2(2) of Regulation 2988/95 was to give the farmers who had innocently mis-declared their set-aside land by over 20% the retrospective benefit of the reduced sanctions provided for by Regulation 1648/95. On this issue, the Court held in the applicants' favour. It stated (para 39):

10. In the result, therefore, while the Court of Justice held in the respondent's favour upon the interpretation of Article 9 of Regulation 3887/92, it held also that the farmers were relieved of the consequences of that interpretation by virtue of the retroactive application of Regulation 1648/95 effected by Article 2 of Regulation 2988/95. Since the Court's ruling the respondent has paid over to the relevant farmers sums amounting to the difference between their set-aside grant as reduced by the lesser sanctions imposed by Regulation 1648/95 and nil.

11. As I have said, the question now raised by these Notices of Motion is whether the respondent is also obliged to pay interest on these sums either from the entry into force of Regulation 2988/95 (26th December 1995) or from the date of delivery of the judgment of the Court of Justice on the Article 177 reference.

12. Mr Duffy QC for the applicants first submitted that the payments due to the farmers, and indeed made to them after the ruling of the Court of Justice, constituted a "debt" within the meaning of s.35A of the Supreme Court Act 1981, so that interest is in principle recoverable under the statute, although on the face of the section it is at the discretion of the court. S.35A(1) provides:

13. Mr Duffy submits that the sums due (and paid) in this case amounted to a debt owed under statute, for which his clients could have sued in proceedings issued by writ; and in that case, interest is in principle available. The first question I must decide is whether that submission is well founded.

14. Are the sums in question a debt for which an action could lie?

15. As it seems to me there is not the slightest doubt that the Community law regime which established the scheme for set-aside payments created a legal entitlement in the farmers to recover the grant or aid in question provided that the qualifying conditions were fulfilled. So far as the amounts fell to be diminished by imposition of the sanctions laid down for over-declarations, the balance remaining due fell as surely within this entitlement as in the case where the farmer makes no over-declaration. As I have said, there is no discretion in the respondent whether or not, or how much, to pay. This is as true in a case such as the present as in one where no sanctions are imposed; there is no more discretion in the ascertainment of any amounts to be deducted by way of penalty or sanction than in the ascertainment of the grant on a 100% basis. The rules are fixed and certain.

16. The term "debt" in s.35A obviously includes a debt owed under or created by Act of Parliament, no less than one due under contract, or any other private law cause of action. In the course of argument I put to counsel a notional example: suppose there were a purely municipal set-aside scheme, having nothing to do with the European Union, established under a British statute and subject to the same or similar fixed rules as in the actual Community scheme. I understood Miss Watson for the respondent to accept that in such a case an unpaid farmer could sue for what was owed to him. At any rate, it is plain to my mind that he could.

17. But Miss Watson submitted that Dennis Rye raises no analogy with the present case. It is convenient to set out paras 8 and 9 of her skeleton argument:

18. I am afraid I regard this argument as amounting to little more than mere assertion. It seems to me clear, with respect, that the first part of Lord Woolf's reasoning in the passage from Dennis Rye which I have cited applies with equal force to the present case. Here, too, I can see no reason why the claimants should not have brought "an ordinary action to recover the amount of the grant which is unpaid as an ordinary debt". (In fact, of course, they did not do so, but instituted proceedings for judicial review; and that is a circumstance to which I must refer in due course.) It is important not to be mesmerised by the fact that the debt was due under European regulations. By Article 189 of the Treaty of Rome (second paragraph) "A regulation shall have general application. It shall be binding in its entirety and directly applicable in all Member States." Mr Duffy QC in his skeleton argument submitted (and indeed it is elementary) that entitlements to payments arising under EC regulations constitute "enforceable Community rights" within s.2(1) of the European Communities Act 1972 and as such "shall be recognised and available in law, and be enforced, allowed and followed..." The regulations in play in this case fall to be treated for all the world as if their provisions were contained in a British statute.

19. In my judgment Miss Watson's submission ignores the crucial circumstance that the balance of the set-aside payments due in this case constituted, in effect, sums owing under statute. In a purely municipal case, if money due under statute were withheld because of a mistake of law made by the debtor as to the amount he was entitled to deduct from what was owing, the proposition that the creditor's claim for the balance was thereby taken out of the category of "debt" would not see the light of day. But Miss Watson's argument, with deference to her, is in precisely the same case.

20. However her submissions were developed by the further proposition (para 11 of her skeleton argument) that "the respondent's refusal is based on the judgment of the ECJ in ... Ex parte Sutton [1997] ECR I-2163". That decision, which was also a ruling on an Article 177 reference made by the Queen's Bench Division, was concerned with arrears of invalidity care allowance, which is a non-contributory social security benefit. It is unnecessary to go into the details. The Court of Justice was asked to decide whether Community law required interest to be paid on arrears where the delay in paying the benefit had been occasioned by unlawful discrimination which was prohibited by a Directive. The Court distinguished the case of Marshall II [1993] I-4367, which was relied on by Mrs Sutton, observing at para 23 of its judgment:

21. The Court went on to consider what it described as

22. After referring to Francovich and other cases, and to the principle that a claim for damages for violation of Community law only arises where (among other things) the breach is "sufficiently serious" (para 32), the Court stated (para 34):

23. Thus there was no finding by the Court of Justice that on the facts of that case the Member State was necessarily obliged by Community law to pay damages by way of interest on the arrears. It would be a matter for the national court's assessment. I have not looked into the course of the domestic proceedings in Sutton after the case came back from Luxembourg. The assumption is that no compensation was ordered or paid; I am sure I would have been told if it was.

24. Miss Watson's argument is to the effect that the late payment of set-aside grant in this case is to be assimilated with the late payment of benefit in Sutton, so that no interest is payable either under Community law or English law. However she faces a crucial difficulty. It is because social security entitlements such as those in play in Sutton cannot give rise to a "debt" cognisable under s.35A. That is by virtue of s.60(1) of the Social Security Administration Act 1992, which provides:

25. It is I think common ground that this measure serves to exclude any right in a social security claimant, such as Mrs Sutton, to sue for unpaid benefit. If authority for that proposition were needed it is to be found in Jones v Department of Employment [1989] QB 1, in which the Court of Appeal was concerned with the predecessor of s.60(1), that is s.117(1) of the Social Security Act 1975, which was to all intents and purposes identical. In Jones the plaintiff, in county court proceedings, had alleged negligence by the adjudication officer in reaching his decision to disallow her claim for unemployment benefit. The case was therefore one in which what was sought to be recovered was damages rather than debt. But the Court of Appeal, in striking out the action, made it plain that the finality provision in s.117 barred any common law claim to challenge the correctness of a social security decision to which the section applied (19C-D, 24G-25B, H-26A).

26. In the result, therefore, Miss Watson's reliance on Sutton simply fails to engage Mr Duffy's principal argument. No statutory claim to interest can arise in a social security case, since action by writ, and therefore the potential benefit of s.35A, is barred to a claimant by s.60. But there is no such inhibition in relation to unpaid set-aside grant.

27. Miss Watson also, in her oral submissions, relied on the fact that her client department administered European funds in relation to set-aside, as regards which any overpayments to farmers are not recovered from the relevant European institution. She submitted that the Community rules in that regard are very strict, and involve the possible imposition in some circumstances of severe financial sanctions against the department in case of misdirection of the Community funds in question. She said "It is one thing to be responsible to one's own government, quite another to be responsible to other authorities". In light of all this, she argued that any complaint to the effect that set-aside payments had not been made in the correct amount at the correct time ought only to be brought by way of judicial review; and that therefore, for this reason, s.35A has no potential application to this case.

28. I reject this submission. To make it good, Miss Watson would have to establish the proposition that action by writ by an unpaid farmer would amount to an abuse of process within the principle explained by the House of Lords in O'Reilly v Mackman [1983] 2 AC 237. As is well known O'Reilly has been much discussed both in academic writing and in later judicial decisions: especially, if I may say so, in the Master of the Rolls' recent judgment in Dennis Rye . There have been two countervailing interests. On the one hand, the O'Reilly principle has given rise to much time-consuming and expensive debate in the courts as to what is and what is not a purely public law case, fit only for judicial review proceedings. On the other, the rule has not only provided necessary protections for bodies making decisions on the public's behalf which often affect many third parties not before the court, but in general terms has released the administration of public law from the usually inappropriate and cumbersome procedures designed for the resolution of private law disputes, enabling the courts to develop the public law jurisdiction in the swift and convenient procedural milieu of Order 53 of the Rules of the Supreme Court. The tensions between these interests should, with great respect, be resolved, certainly much lessened, by Dennis Rye .

29. I need not for the purposes of this case describe the Master of the Rolls' reasoning in passages other than that which I have already set out. It seems to me entirely clear that where a claimant has a plain cause of action for recovery of a statutory debt, he must be entitled to pursue it by writ proceedings; it would be quite impossible to categorise the issue of such process as an abuse of the process of the court. Miss Watson's argument amounts to a plea for convenience over law. I do not underestimate the department’s difficulties, which, without doubt, are confronted in perfect good faith and on legal advice of high quality. But as a matter of analysis they are no different from any situation in which a potentially expensive claim arises for payment under a statute which is difficult to construe. There can be no basis in such circumstances for the view that writ proceedings, and thus s.35A, are in some way inapplicable or inappropriate.

30. The proposition that a debt due under a Community regulation, no less than one due under municipal legislation, may be recovered by writ with the concomitant advantage of s.35A is powerfully supported by this further consideration, on which Mr Duffy relied. It is well established in the jurisprudence of the Court of Justice that

31. For all these reasons I would uphold Mr Duffy's principal contention.

32. Do the applicants fail because they have not in fact sued by writ?

33. In the course of her oral argument Miss Watson advanced a further submission, which on the face of it possesses an attractive simplicity. She pointed to the circumstance that, as I have said, the applicants here did not in fact sue by writ. She said that s.35A was therefore not in play on the face of the proceedings, and that the Notices of Motion amounted to what she called a "stand alone" claim for interest, which thus cannot succeed by reference to s.35A. It was clear in the course of the hearing that this submission took Mr Duffy by surprise. It was not adumbrated in Miss Watson's skeleton argument. It is true that para 8 of her skeleton contains the sentence "These proceedings are not "for the recovery of a debt or damages". But the context makes it clear, I think, (and I have already set out the paragraph) that the argument being advanced was not that the applicants had chosen the wrong form of process but that their claims in principle could not be the subject of writ proceedings so as to attract the application of s.35A; and I have rejected that submission. Moreover it is plain from two documents put before me during the argument, when this point was first raised by Miss Watson, that the parties' common understanding was that the issue, interest or no, should be resolved as a matter of principle at the hearing of these Notices of Motion. One is a letter from the applicants' solicitors to the Crown Office dated 23 December 1997 which contains the sentence "... the Respondents and the Applicants in both matters have agreed that the interest issue in respect of both actions should be determined at the hearing..." The second is an attendance note of a telephone discussion between the solicitors on 25 November 1997. I need not set it out. It tends to confirm that the respondent's solicitor was approaching the case on the footing that the issue was one of substance whose resolution depended on the facts and the applicable law.

34. Certainly this is not a case where judicial review proceedings were intrinsically inappropriate, so that the applicants' case ought to have been instituted by writ; I can well understand that it was thought most convenient to proceed under Order 53. But the question is whether, having chosen that route, they are now to be denied interest in consequence. In view of the entirely responsible conduct of the parties in approaching the interest issue, and the fact that there can have been no possible doubt (since before the Notices of Motion were issued) but that the applicants sought a substantive ruling as to whether interest is recoverable, I cannot hold that the applicants are, as it were, to be non-suited for failure to sue rather than go by judicial review. Had there been the least indication, when the claims for interest were first asserted, that the respondent took issue with them on procedural grounds the position might have been very different. But if that had been the case, I would certainly have been told. I apprehend that Miss Watson, whom I do not criticise, was on reflection, and in light of the two documents I have mentioned, disposed to accept that the case should not be made to turn on any procedural point as to the form of process adopted. Indeed towards the close of her submissions she agreed in terms that all parties desired the interest issue to be resolved as a matter of principle.

35. Mr Duffy relied not only on this common understanding between the parties, but also submitted that were it necessary I could make an order under Order 53/9(5) that these proceedings should continue as if begun by writ, and in that case s.35A would be directly applicable. On reflection, I do not think that is right. The rule allows such an order to be made "[w]here the relief sought is a declaration, an injunction or damages and the Court considers that it should not be granted on an application for judicial review but might have been granted if it had been sought in an action begun by writ by the applicant at the time of making his application..." That is not the position here; it is not a case in which the relief sought in the judicial review was inapt for such proceedings. Mr Duffy referred also to Woolwich v IRC [1993] AC 70, in order to demonstrate that interest may be awarded under s.35A even in a case where interest is the only issue the judge has to decide. But, as the report of the first instance proceedings before Nolan J as he then was shows ([1989] 1 WLR 137: see 138H-139C), the writ had been issued before payment of the principal debt, and s.35A(1)(a) specifically contemplates the payment of interest where some or all of the debt has been paid before judgment in proceedings for its recovery. So these additional submissions by Mr Duffy do not carry the case forward.

36. In the result I propose to grant the declarations sought on the basis that the parties have, by their conduct, treated these Notices of Motion as if they constituted claims to which s.35A applied (the motions refer in terms to the section), and that the respondent accepts that if I conclude, as I have, that the section is in principle applicable to these claims so that action by writ might have been brought in respect of them, interest should be payable.

37. Other arguments

38. Mr Duffy advanced alternative submissions in his skeleton argument, to the effect that if he is wrong about s.35A his clients are nevertheless entitled to interest by way of damages for breach of Community law. Essentially the submission is that the breach was "sufficiently serious" to engage the Community principles as to damages discussed in Sutton. I did not hear any oral argument on this aspect of the case, and it would be entirely unfair for me to rule in Mr Duffy's favour on the point without having heard from Miss Watson. Accordingly I express no conclusion, save that I will add this. First (and despite Mr Duffy's written submission to the contrary), I think it highly likely that if the case depended on this issue it would be necessary to make a further reference to the Court of Justice under Article 177. Secondly, the Notices of Motion assert only that the interest claimed is payable under s.35A; I doubt whether an alternative argument based on the principles relating to damages for breach of Community law ought to be open to the applicants, although it is right to say that Miss Watson's skeleton argument seeks to address the issue.

39. Time from which interest should run

40. The cause of action for recover of the balance of set-aside payments arose from the date when Regulation 2988/95 entered into force: 26 December 1995. There are no arguments as to delay, or any other defaults by the applicants, such as might in a municipal case cause the court to withhold interest in respect of any particular period. I see no reason why interest should not run from 26 December 1995.

41. MR JUSTICE LAWS: I hope counsel has the handed down judgment in this case in good time. For the reasons there given, the application succeeds.

42. MR DUFFY: My Lord, I am obliged. My first application is that your Lordship should grant declarations that interest is payable under section 35A of the Supreme Court Act with effect from 26th December 1995.

43. MR JUSTICE LAWS: That is the date of the reference----

44. MR DUFFY: That is the date referred to on page 20 of your Lordship's judgment. I have spoken to my friend, Miss Watson, and I understand that she is agreeable with such declarations being granted.

45. MR DUFFY: My second application is for costs.

46. MISS WATSON: I have no objection to that.

47. MR JUSTICE LAWS: The Applicants will have their costs.

48. MISS WATSON: I should like to apply for leave to appeal.

49. MR JUSTICE LAWS: On what basis, Miss Watson?

50. MISS WATSON: I am afraid your Lordship that we have some difficulties with the judgment in the sense that it may create further difficulties for the Ministry and for those involved in activities, such as the Ministry, in the sense that -- the fundamental problem of whether a claim for interest is a standard or remedy still remains. The situation in this case is that the interest point only arose when the payments were actually being made out, or after they had been made out. No claim had been started by way of Writ, or for that matter by way of judicial review proceedings, for the difference between the sanctions originally imposed and the sanctions which should have been imposed and interest.

51. MR JUSTICE LAWS: That is historically entirely right. The difficulty, as I understood it, and went at some lengths to explain in the judgment, unless I understood it wrongly, is the parties were ad idem that the interest question should be sorted out as a matter of principle.

52. MISS WATSON: The parties, as you will see from the records, were in entire agreement that the interest should be sorted out as a matter of principle, but when the parties had those conversations the Respondents explained that they were refusing to pay interest on the basis of Sutton and the Applicants were speaking of Marshall. However, at that point in time the issue of section 35A and its applicability to the situation had not arisen. That arose for the first time in the Notice of Motion, so, in fact, when those conversations took place the understanding, at least the understanding on the Respondent's part, was that judicial review proceedings should be carried on with a view to deciding whether there was a right to interest or not as a matter of community law.

53. MR JUSTICE LAWS: I am not sure that it is appropriate or even very practical for me to travel back into that history now. Let us see what Mr Duffy says.

54. MR DUFFY: I oppose the application for leave to appeal being granted on the following grounds: your Lordship's judgment is based upon decisions of the Court of Appeal and of higher Courts which are in point, that is, the Dennis Rye case, the distinction of the social security in the Jones case, the line of cases my Lord referred to at page 15 of your Lordship's judgment, and they

55. MR JUSTICE LAWS: What about the stand alone point?

56. MR DUFFY: In reply to my friend, if there was a claim rooted in community law for damages for interest as a part of damages, it would, under the principles of the Francovich case, fall to be applied through the vehicle of domestic law. The vehicle of domestic law that gives effect to the interest is section 35 of the Supreme Court Act. Our primary submission was that this was something that could have been treated as section 35 of the Supreme Court Act. The main submission necessarily have to be rooted through the procedures of national law. That is the effect of the line the Court of Justice has drawn in the cases my friend has referred to. Really, in my submission, that point does not take her anywhere.

57. MR JUSTICE LAWS: Miss Watson, do you want to say any more?

58. MR WATSON: I still have the fundamental problem that in case law, to which Mr Duffy rightly refers, there has always been a claim by one route or another for a basic sum of money and the interest on that sum of money. In this case here the question of sanctions only arose because of the European Court of Justice judgment. MAFF took steps to comply with that, the money was paid out and it was at that point that the interest question arose. Our problem is whether the interest is a standard law remedy or not.

59. MR JUSTICE LAWS: I think you must ask the Court of Appeal for leave. Thank you. I think there are copies of the judgment which I certify should be regarded as authentic in the sense that no further shorthand note need be made. If there are copies they are available for anyone who is interested in them. Thank you very much.