In the recent case of The Department for Energy and Climate Change ("DECC") v Breyer Group PLC and Others [2015] EWCA Civ 408 the Court of Appeal upheld the High Court's decision that a proposal published by DECC could amount to an unjustified interference with property rights under the Human Rights Act ("HRA").

Key points

  • The ever elusive distinction between marketable goodwill (which is a protected right under the HRA) and future income (which is not protected) was illustrated by reference to the enforceability of contracts:
    • Enforceable, concluded contracts were deemed to have marketable goodwill and so were protected.
    • Contracts which were yet to be concluded were not caught.
  • A proposal to do something which is unlawful does not make the proposal itself unlawful.
  • A proposal, which of itself has no legal effect, can still amount to an interference with European Convention on Human Rights ("ECHR") Article 1 Protocol 1 (“A1P1”) rights to peaceful enjoyment of their possessions where "in a real and practical sense" there is interference due to the publication of that proposal.
  1. Background
  2. Grounds for appeal
  3. Comment

1. Background

The Claimants were businesses in the supply chain of UK solar. The “Feed-in-Tariffs” (“FIT”) scheme was introduced by the Department of Energy and Climate Change (“DECC”) on April 2010, encouraging low carbon generation of electricity, for instance through solar photovoltaic (“solar PV”).

DECC originally stated that the FIT scheme tariffs would remain unchanged for installations during April 2010 and April 2012. However, in October 2011 DECC published a consultation in which it was proposed that the April 2012 date would be brought forward to December 2011 (the "Proposal"). Any contracts after December 2011 would be eligible only for a reduced tariff, not the original tariff.

The Claimants argued that many of the installations which would otherwise have been completed by April 2012 were abandoned as a direct result of the making of the Proposal. As such they argued that DECC had infringed their A1P1 rights.

2. Grounds for appeal

DECC appealed the decision of the High Court that the Claimants were entitled to claim damages as the interference with their A1P1 rights was unjustified. The Claimants cross-appealed the High Court’s decision that the Claimants could claim damages for enforceable contracts only, not contracts which were in the process of being completed.

Court of Appeal’s decision

The Court of Appeal unanimously dismissed both the appeal and cross-appeal.

Defining “possession”

There were various categories of contract for the installation of solar PV:

  1. leases which had been requested and sent to customers;
  2. leases signed by customers;
  3. leases signed by both parties;
  4. solar PV systems which had been installed and commissioned; and
  5. solar PV systems which had been installed and commissioned and FIT licences applications had been made.

The Claimants argued that the High Court judge had been too restrictive when applying the definition of "possession" to these contracts, in excluding categories (i) and (ii).

Lord Dyson MR, giving the leading judgment, stated that the definition of “possession” under A1P1 may include marketable goodwill, but excludes a potential future income stream. In the context of A1P1, future income only becomes goodwill once an enforceable claim exists.

Lord Dyson found that category (i) was not caught by A1P1, as contracts which a business hopes to secure in the future are no more than that. Category (ii) was the most difficult to classify. The High Court judge held that to the extent the contracts in category (ii) had not been concluded and were not legally binding, they had more in common with a claim for loss of future income (i.e. category (i)) than a claim for loss of marketable goodwill. Therefore, category (ii) contracts also did not qualify for protection under A1P1.

Lord Dyson affirmed the High Court’s decision to make a distinction between (i) possible future contracts and (ii) existing enforceable contracts. The latter reflects capacity to earn profits in the future. The former is merely a hope.

Can a proposal amount to interference?

In order to substantiate a claim under A1P1, the claimant has to demonstrate an interference with enjoyment of its possessions. Lord Dyson found that a proposal can amount to interference under the ECHR; it depends on the nature of the proposal. Although the Proposal was not a final decision and did not have legal effect, in a real and practical sense it had interfered with the Claimants’ business. As such, the Proposal had “interfered” as a matter of law.

Was the interference justified?

An interference with an A1P1 right can be deemed lawful if it is "justified". The Proposal, if implemented, was held to be unlawful in Secretary of State for Energy and Climate Change v Friends of the Earth [2012] EWCA Civ 28. However, Lord Dyson held that it is not unlawful to consult on a proposal to do something which is unlawful. He suggested that there is a fundamental difference between consulting on a proposal and implementing it. He noted that the point of a genuine consultation is to enable the authority to consider responses to make a fair, informed and lawful decision. The responses might assert that the proposal, if implemented, is unlawful; or that it needs to be modified to be lawful.

However, despite the wide margin of discretion enjoyed by DECC, Lord Dyson agreed with the High Court judge that the Proposal did not strike a fair balance between the public interest and the interests of the investors in the scheme. The relevant factors were:

  1. DECC’s statements that April 2012 was the cut-off date;
  2. the Minister’s statement that there would be no retrospective tariff changes;
  3. the scale of the investments made by the Claimants in reliance on the statements;
  4. the losses caused by the interference were dwarfed by the savings achieved by DECC.

Lord Dyson noted that this conclusion was bolstered by DECC apparently giving very little consideration to the impact the Proposal would have on existing businesses (including in the Impact Assessment).

3. Comment

This is an important instance of a company winning a case using an A1P1 argument and being awarded damages on that basis.

The distinction between goodwill and future income under A1P1 is not easy to draw. However, applying the definition to the list of contracts at different stages of maturity gives some guidance on what may constitute a “possession” under A1P1.

The decision also gives public authorities guidance when drafting consultations. Policy makers drafting the consultation should remain in close contact with people making public statements in relation to the subject matter of the consultation. Staff should also consider the impact on stakeholders of (i) the proposal being published, and (ii) the implementation of the proposal itself. The consideration of the latter should be reflected adequately in the impact assessment.

Meanwhile those who may be the subject of a measure which could interfere with their rights will wish to consider what is being said in the public authority's proposals, and any consultation and other statements, to assess the impact of the proposed measure on their rights.