Levy order text changes may follow court case

Parts of the text of the levy order at the heart of a case recently won by AHDB against RC Smith Plants may be redrafted as a result of the case, the levy body has acknowledged.

RC Smith Plants owner Richard Smith refused to pay the levy after disputing AHDB's definition of "retail". Smith said most of his plants are sold as retail plants, but a judge found otherwise.

However, Smith's barrister said the levy board order is "a mess" and AHDB corporate affairs director Guy Attenborough has told Horticulture Week that the levy body has told Defra that it "believes a few parts of the text could benefit from greater clarity to avoid any potential discrepancies such as the one Mr Smith feels he has on retail".

AHDB said: "Richard Smith believed AHDB's definition of 'retail' in its guidance on completing the levy return form was wrong and refused to pay what AHDB had invoiced as being due. Back in 2011, after protracted discussions with him, AHDB sued him for the outstanding horticulture levy, in order to obtain a judicial decision that would finally settle the dispute and obtain any levy due. The court analysed the matter in 2011 and found in AHDB's favour. "

Smith disputed the matter and refused to pay, and AHDB again sued for the outstanding levy.

A hearing was held in Nuneaton County Court on 10 September to determine whether his defence had merit.

Smith had three lines of defence. First, the disputed definition of "retail", as used in the statutory formula for calculating the "adjusted sales figure"on which levy is due. The judge considered the 2011 analysis made by a different judge. He decided that this was thorough and correct, and that AHDB's definition was appropriate to use.

Second, Smith claimed he was entitled to a reduction for packing costs, as per the statutory formula for calculating the adjusted sales figure. The judge found that AHDB had already made such an allowance in each of the years for which levy was outstanding.

Third, Smith said he was unable to understand the figures used by AHDB in calculating the levy due. These were figures provided by Smith in his levy return. The judge examined the figures and found them to be clear. The court therefore found that there was no merit in the defence put forward by Smith and awarded AHDB outstanding levy of £3,783.14 together with statutory interest and a proportion of costs, to be paid within 14 days.

No 5 Chambers barrister for Smith Neil Chawla said: "The case was being argued against as the basis for the calculations by the AHDB were not at all clear and the order was not clear. The previous case in 2011 in its reasoning referred to 'retail' as being more than 200 units and yet the AHDB had allowed 20,000 units, hence the confusion and illustrating that retail depends very much on the actual sale and not the amount.

"As emphasised by the case, the guidance issued goes further than the actual 2008 order, hence the need for judicial review or amendment. This was raised by Smith at the hearing and the judge commented that would be heard at a far higher court. Smith was outlining that if they had a claim under retail as per their guidance, as was alleged, then surely they would have also a claim for packing under their guidance, but they did not bring any claim for the latter, which seemed inconsistent.

"If Smith's packing costs had been accepted by the AHDB then they had set a precedent for these costs been accepted in the future. Mr Smith has no issue with making proper payments. However, the guidance and the order need to be clear and consistent. Currently it is a mess."

In a statement, the AHDB said: "AHDB regrets that this does not represent the full costs to the horticulture sector, because some legal costs were not awarded and it didn't include staff time, all of which has to be paid from horticulture levy. However, AHDB is not willing to allow recalcitrant levy payers to avoid paying levy and thus to be subsidised by those who do make proper payments."

In relation to packing costs, AHDB's guidance "has consistently made it clear that these are the costs incurred in packing horticultural products ready for sales to customers and that it does not include costs incurred in growing the products. AHDB accepts that most growers provide accurate information on this in their return forms. However, Mr Smith shot himself in the foot in communications before the hearing by stating that a substantial proportion of the 'packing costs' he had declared and that had already been allowed were in fact growing costs.

"Mr Smith has therefore, for several years, paid even less levy than he should have paid and AHDB will be seeking these overdue amounts. In relation to any other levy payers who have included growing costs in their returns, AHDB will take similar action should it discover this.

"Levy payers who have failed to include packing costs in their levy returns are unlikely to be able to correct this at a later date. AHDB's guidance is clear and it will have invoiced on the basis of the figures provided by the levy payer, or on its estimated figures if no proper return is made by the statutory deadlines. While it will consider claims for adjustments, only in exceptional circumstances will AHDB refund levy it has invoiced on the basis of a return."

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