Breyer Group plc & Others v Department of Energy and Climate Change [2014] EWHC 2257 QB

Key Points  

  • Concluded contracts, and goodwill that can be capitalised, are 'possessions' which are protected by the right to property under the Human Rights Act.
  • A proposal to change a policy may be sufficient to interfere with a protected right, even if a final decision has not been taken.

Background

The Human Rights Act allows the courts to award damages when necessary, following a breach of any of the rights protected by that Act. The High Court recently heard a group of claims brought against the Government by companies in the small-scale solar energy industry (the "Solar Companies").

Under a policy of facilitating and encouraging investment in low-carbon energy, the Government guaranteed that a particular price would be paid per kilowatt/hour of energy produced by small-scale solar installations. The original terms of the policy were such that installations completed before 1 April 2012 would qualify for the highest available price, for the following 25 years. The Government repeatedly made statements that it would not make retrospective changes to the guaranteed price. Despite this, following concerns about the costs of the policy, on 31 October 2011 the Government announced a consultation on a proposal to bring forward the cut-off date for installations to qualify for the highest price, to 12 December 2011 (the "Proposal").

The Solar Companies then abandoned installations that would otherwise have been completed by 1 April 2012, but would not be finished before the newly proposed cut-off date, because not being able to qualify for the highest price made these installations economically unviable. In January 2012 the Court of Appeal ruled that the Proposal was in fact unlawful. Nevertheless in many cases it was too late to revive abandoned contracts to install solar panels by the April 2012 cut-off. The Solar Companies then brought proceedings against the Government, arguing that the Proposal had been a breach of their right to property, and claiming damages in respect of the losses caused.

The Right to Property under the Human Rights Act

The right to property protects the peaceful enjoyment of possessions. The Solar Companies claimed that the following were possessions for this purpose:

  1. contracts relating to solar installations;
  2. the goodwill in their companies; and
  3. the legitimate expectation of the highest available price per kilowatt/hour. 

The Government argued that none of these were possessions, but were simply claims for loss of future income, for which damages cannot be awarded.

The court found that any concluded contracts, which had been signed by both the Solar Company and the relevant customer, were possessions in this context. However, unsigned contracts, even those that were in advanced stages of negotiation, could not be possessions other than in exceptional circumstances. The judge suggested that it would only be in situations where work had been started or part of the price had been paid that unsigned contracts could be possessions protected by the right to property.

The court also held that goodwill was a possession, as long as it could be properly capitalised. This meant that goodwill that had been built up in the past, and had a present value, was a possession. However future goodwill was not a possession in this context. As such, a potential loss of goodwill going forward was merely a loss of future income, for which damages could not be claimed. Effectively the only goodwill that could be a possession was that resulting from concluded contracts.

The Solar Companies had also argued that they had a legitimate expectation of earning the highest available price, and that this expectation was a possession. The court agreed with this argument only in relation to contracts concluded before the Proposal was made. However, given that the court had already recognised the concluded contracts themselves as possessions, this expectation did not add anything to the claim. The court did not accept that there was any expectation in relation to the unsigned contracts or potential loss of future goodwill.

Interference

In order to claim damages, the Solar Companies also had to show some interference with these possessions. Specifically, they had to prove that the Proposal was a Government action that had a material economic impact upon their concluded contracts and goodwill.

The Government sought to argue that the Proposal could not have been an interference, as it was merely a consultation and not a final Government action. However, the court found that this argument was unrealistic. Indeed, after announcing the Proposal, the Government had been referring the Solar Companies to official advice that the industry should use the dates and figures from the Proposal. As such, the possibility of future action was enough to constitute an interference with the Solar Companies' possessions.

The Government also argued that the Proposal had not directly caused any material economic impact, as the Solar Companies themselves had decided to abandon their installation contracts. Nonetheless, the court found that the abandonment of contracts had been an inevitable consequence of the Proposal, which was therefore an interference with the Solar Companies' rights.

Justification

If the Government could have shown that the interference with the peaceful enjoyment of the Solar Companies' possessions was in the public interest, then there would be no breach of the right to property, and therefore no damages payable. In this case however, the judge found that the Government could not justify the Proposal, as it was an unlawful act.

Damages

Having established that there had been a breach of the Solar Companies' rights, the court found that they were entitled to damages from the Government, in respect of their abandoned contracts and lost goodwill.

The judge confirmed that damages under the Human Rights Act would be calculated so as to put the Solar Companies into the position that they would have been in, had the Government not made the Proposal.

Comment

There have been relatively few cases on damages for the breach of the rights of companies under the Human Rights Act. In the last notable case, in February 2013, damages were awarded to Infinis plc after it was unlawfully refused renewable energy certificates, in breach of its right to property. The Solar Companies' case arises in a similar context: a denial of a statutory entitlement by the Department for Energy and Climate Change.

The lack of cases means that there are a number of issues in this area that remain untested in the courts. The Solar Companies' case sets a helpful precedent in relation to what will constitute a possession in this context. It is also notable that the court found there to be an interference on the basis of the Proposal alone, which was at the time a mere consultation, as opposed to a final decision. It remains to be seen whether this generous interpretation will be followed in future human rights claims.