Breyer Group Plc & Ors v Department of Energy and Climate Change

For the purposes of Article 1 of the First Protocol, concluded contracts with present economic value may be possessions. Prospective or incomplete contracts are generally no more than hopes of future income, although negotiations may establish a binding contract where only inessential details remain.

Marketable goodwill may also be protected, but anticipated profits are not. A legitimate expectation cannot operate as a substitute for an existing asset or possession. A Government proposal may constitute State interference where it deliberately and foreseeably causes immediate economic harm, even though it has no legal effect and is never implemented. Unlawful interference cannot be justified. In principle, damages may be awarded to provide restitutio in integrum.

The claimants operated businesses connected with small-scale solar photovoltaic installations under the Feed-in Tariff scheme created pursuant to the Energy Act 2008. The scheme provided fixed generation tariffs for eligible installations, with the highest rate available for installations completed by 31 March 2012.

On 31 October 2011 the defendant announced a consultation proposal to bring the relevant reference date forward to 12 December 2011 and substantially reduce future tariffs. The proposal was later held unlawful in judicial review proceedings and was not implemented. The claimants alleged that its announcement caused installations and contracts to be abandoned, interfering with possessions protected by Article 1 of the First Protocol. The preliminary issues concerned possessions, interference, justification and entitlement in principle to damages.

1. Possessions. Concluded contracts entered into by 31 October 2011, having tangible economic value and enforceable terms, were assets and therefore possessions for Article 1 of the First Protocol purposes. Termination provisions did not prevent a contract being a possession, though they might affect its residual value.
2. Unsigned or incomplete contracts were generally not possessions. They were intangible, non-assignable and lacked present economic value. The exception was a case where the negotiations and conduct established that a binding contract had already arisen, even though only inessential details remained: Pagnan v Feed Products and G Percy Trentham v Archital Luxfer.
3. Loss of future income was not a possession. Marketable goodwill could be one, where it had been built up in the past, had a present monetary value and could be capitalised. The relevant distinction was between existing marketable goodwill and a merely prospective ability to earn profits.
4. A legitimate expectation was not a free-standing substitute for an asset. It had to be attached to an existing property right or asset. In relation to concluded contracts, however, the claimants had a legitimate expectation of enjoying those contractual assets and receiving the expected tariff, subject to the statutory procedure and representations concerning non-retrospectivity.
5. Material economic consequences were necessary but not sufficient to establish interference. There also had to be State action causing those consequences. The deliberate publication of the Written Ministerial Statement and consultation proposal was State action. On the assumed facts it immediately and foreseeably damaged the claimants’ concluded contracts and related goodwill. The fact that the proposal was not legislation, had no legal effect and was never implemented did not prevent interference.
6. The claimants’ commercial decisions to abandon installations did not break causation. Where those decisions were shown to have resulted from the proposal, the resulting loss was a direct consequence of the defendant’s conduct.
7. The interference was unlawful because the proposal exceeded the defendant’s statutory power. It therefore could not be justified. The defendant could not rely on hypothetical primary legislation which it had not enacted to divert attention from the unlawful action actually taken.
8. Alternatively, the defendant failed to establish a fair balance. Relevant considerations included the certainty promised to investors, the importance of the original cut-off date, the scale of investment, the deliberate intention to reduce installations and the environmental consequences, weighed against budgetary and scheme-management aims.
9. In principle, the claimants were entitled to damages where necessary to afford just satisfaction under section 8(3) of the Human Rights Act 1998. Damages were to be assessed on a restitutio in integrum basis and would depend on proof that particular contracts or goodwill had been directly and demonstrably affected.
10. The answers to the preliminary issues were therefore: qualifying possessions existed; the proposal interfered with them; the interference was unjustified; and damages were recoverable in principle, subject to factual assessment.

The judgment records earlier judicial review proceedings concerning the same proposal. The Administrative Court held the proposal unlawful in [2011] EWHC 3575 (Admin). The Court of Appeal upheld that conclusion in [2012] EWCA Civ 28, and permission to appeal to the Supreme Court was refused. Those decisions concerned the statutory lawfulness of the proposed modification, not the Article 1 of the First Protocol claims determined here.