Can anyone tell me how vets test for this ( ie what the procedure is )and what proof of this test should a breeder have to show you its been done,thanks

There is no official scheme, sadly, so most breeders will not have any proof. Basically the vet manipulates the hindlegs and that's it. Some breeders ask their vet so write them a certificate saying they have examined their dogs and not found a problem but again it's nothing official.

They do have a greding system in the USA, so I really don't understand why ti isn't adopted ehre?

This is wiki http://en.wikipedia.org/wiki/Luxating_patella so may need to be taken with pinch of salt, and further supporting veterinary articles needed for support.

There are four diagnostic grades of patellar luxation,[4] each more severe than the previous:

Grade I - the patella can be manually luxated but is reduced (returns to the normal position) when released;
Grade II - the patella can be manually luxated or it can spontaneously luxate with flexion of the stifle joint. The patella remains luxated until it is manually reduced or when the animal extends the joint and derotates the tibia in the opposite direction of luxation;
Grade III - the patella remains luxated most of the time but can be manually reduced with the stifle joint in extension. Flexion and extension of the stifle results in reluxation of the patella;
Grade IV - the patella is permanently luxated and cannot be manually repositioned. There may be up to 90° of rotation of the proximal tibial plateau. The femoral trochlear groove is shallow or absent, and there is displacement of the quadriceps muscle group in the direction of luxation.

Here is teh Orthopaedic Foundation for animals (OFA) which in USA handles his screenign etc:
http://www.offa.org/pl_overview.html

Quite a few breed clubs seem to use the same scheme - Pharoah Hounds, English Toy Terriers, Cesky Terriers, Affenpinschers come up in a Google search.