D2M Solutions Ltd v Secretary of State for Communities and Local Government

An ex gratia compensation scheme must be interpreted objectively, purposively and as a whole. A scheme directed to reasonable wasted costs and additional expenses does not ordinarily extend to lost profits or earnings merely because its broader aim is restoration. The restoration objective does not guarantee the outcome that would have followed absent an error, particularly where a planning decision involved judgment and the lawful outcome was uncertain.

A1P1 does not ordinarily protect an anticipated future income stream from a proposed development. The capitalised value of future income is distinct from goodwill derived from an established business. A mere refusal of planning permission, or an error requiring redetermination, does not ordinarily interfere with possessions so as to create an entitlement to compensation.

The claimant challenged decisions made on behalf of the Secretary of State by the Planning Inspectorate concerning an ex gratia claim. An earlier planning appeal had been quashed because the Inspector misstated the proposed wind turbine’s annual output. The appeal was later allowed on redetermination, but changes to the Feed-in Tariff Scheme allegedly reduced the development’s profitability.

The claimant sought compensation principally for projected lost profits, together with other costs and losses. The first decision was accepted to be defective on the goodwill-payment issue and was reconsidered. The central questions were whether the applicable scheme covered loss of earnings or profits, whether the restoration objective required compensation for the alleged counterfactual loss, and whether A1P1 of the ECHR required such compensation.

1. Application refused. The court rejected all grounds of challenge to the decisions of 4 April and 11 October 2017.
2. The meaning and scope of an ex gratia scheme are objective questions for the court. The scheme must be read purposively and as a whole, while its application involving judgment is reviewable only on ordinary public law grounds, such as irrationality. The language of the PINS scheme focused on demonstrably incurred wasted costs, additional expenses, interest and, where appropriate, a goodwill payment for substantial injustice, hardship or distress. It did not extend to past or future loss of earnings or profits.
3. The restoration objective did not alter that interpretation. It required consideration of restoring the claimant, so far as reasonably possible, to the position it would have occupied absent the error. It did not establish that planning permission would have been granted without the Inspector’s error. Planning appeals involve judgment on several issues, and a lawful redetermination may succeed or fail. The claimant’s claim therefore failed both because projected profits were outside the scheme and because its counterfactual assumption was unjustified.
4. The A1P1 claim also failed. The anticipated income from the undeveloped site was not goodwill derived from an established customer base or past business efforts. Capitalising a future income stream did not convert it into a protected possession. A refusal of planning permission, or an error requiring correction where the ultimate planning outcome remains uncertain, did not amount to an interference with possessions.
5. The goodwill-payment provision could not be used as a back-door route for a loss-of-profits claim. The claimant had not advanced a properly identified exceptional-circumstances case. Costs incurred in separate proceedings concerning the Ministry of Defence’s challenge were outside the scheme, and the consultancy-fee claim was rejected for want of substantiation.

This was a first-instance judicial review. The court refused the application.