The Department for Energy and Climate Change v Breyer Group Plc & Ors

For the purposes of Article 1 of the First Protocol, marketable business goodwill and secured contracts may be possessions, but hoped-for contracts and an unearned future income stream are not. A public authority may interfere with possessions through a proposal which has no legal effect if, in practice, it has an intended and serious adverse effect on the business concerned.

A genuine consultation on a proposal which would be unlawful if implemented is not itself unlawful. The interference may nevertheless be unjustified where it fails to strike a fair balance between the public interest and investors’ reliance on published assurances, including assurances against retrospective change.

The respondents operated businesses connected with solar photovoltaic installations under the feed-in-tariff scheme. The Department published a consultation proposal which was intended, and assumed, to cause businesses to stop pursuing installations that could not be completed by an earlier reference date. The proposal was never implemented after it was held to be ultra vires in separate judicial review proceedings.

Coulson J held that concluded contracts and marketable goodwill referable to them were possessions protected by Article 1 of the First Protocol. He also held that the proposal interfered with those possessions, was unlawful and disproportionate, and could in principle found damages for lost profits: [2014] EWHC 2257 (QB). The Department appealed the findings on interference, justification and damages. The claimants cross-appealed on the scope of goodwill as a possession.

1. Both the appeal and the cross-appeal were dismissed. The court upheld the conclusion that the proposal interfered with the respondents’ protected possessions and that the interference was not justified.

2. Marketable goodwill may be a possession under Article 1 of the First Protocol, but a future income stream is not. The critical distinction is between the present value of a business built up through past work, reputation and secured contracts, and expected income from contracts which the business merely hopes to obtain. Existing enforceable contracts may form part of marketable goodwill. Possible future contracts do not, even if their anticipated income could be given a present capital value.

3. A proposal can amount to an interference although it does not alter legal rights. The inquiry is practical. A proposal which has no material effect on possessions is not an interference. Here, however, the assumed facts established that the proposal was intended to, and did, make the respondents’ solar-installation businesses economically unviable. That practical effect was sufficient.

4. The court disagreed with the judge that the consultation proposal was unlawful merely because its proposed implementation would have been unlawful. A genuine consultation may expose legal objections and lead to abandonment or lawful modification of the proposal. Consulting on such a proposal is therefore not inherently unlawful.

5. That conclusion did not justify the interference. Although the Department had a wide margin of discretion in pursuing the legitimate public aim of controlling scheme costs, the balance was unfair. The court relied on the published April 2012 position, assurances against retrospective tariff changes, the substantial investments induced by those assurances, and the disparity between the claimants’ losses and the estimated savings. The judge should not have relied on an unsupported environmental effect, but that did not affect the result.

6. Damages depend on the facts of each claim, including actual causation and the particular contracts or goodwill affected. The claimants’ commercial decisions did not inevitably break causation where those decisions were a direct response to the proposal.

• Court of Appeal (Civil Division). The Department’s appeal and the claimants’ cross-appeal were dismissed.
• High Court (Queen’s Bench Division). Coulson J determined preliminary issues in favour of the claimants on interference, lack of justification and damages in principle: [2014] EWHC 2257 (QB).