The Durham Company Ltd (t/a Max Recycle) v Durham County Council

A claim for damages against the State for breach of EU State aid rules is subject to the Francovich State Liability Conditions. The claimant must plead facts addressing whether the breach was sufficiently serious, not merely allege breach and loss. Where the State has limited or no discretion, infringement may be sufficient, but it is not automatically so. The seriousness of the breach remains a fact-sensitive value judgment. A claimant cannot recast State liability under Article 108(3) TFEU as an unrestricted English claim for breach of statutory duty. Summary judgment may be given where the pleaded case has no realistic prospect of satisfying the seriousness condition. Declaratory relief may fail where the relevant legal regime has expired and the declaration would have only historic or academic significance.

The claimant provided commercial waste services in competition with services provided directly by the defendant local authority. It alleged that the defendant subsidised its commercial waste business through household-waste infrastructure, personnel and resources, thereby granting unlawful State aid contrary to Articles 107(1) and 108(3) TFEU.

The defendant applied to strike out the claim or obtain summary judgment. The claimant sought permission to amend its particulars of claim, including to plead an English claim for breach of statutory duty and further facts said to establish sufficiently serious State liability. The court considered the damages claim, the proposed amendment, and claims for declaratory and mandatory injunctive relief.

1. Application and amendment. The court granted summary judgment for the Council. The proposed amendment asserting an unrestricted English claim for breach of statutory duty was refused. The threshold for permission to amend was whether the proposed case had a real prospect of success.
2. State liability. Liability for breach of Article 108(3) TFEU was governed by the State Liability Conditions identified in Francovich and Bonifaci v Italy [1991] ECR I-5357 and Brasserie du Pêcheur SA v Factortame Ltd [1996] ECR I-1029: the rule must confer rights on individuals, the breach must be sufficiently serious, and there must be a direct causal link to the loss.
3. The proposed English breach-of-statutory-duty claim was plainly wrong. Article 108(3) imposes obligations on the State, and the EU-law remedy is subject to the State Liability Conditions. Betws Anthracite Ltd v DSK Anthrazit Ibbenburen GmbH [2003] EWHC 2403 (Comm) concerned a different claim against a commercial recipient of State aid and did not support TDC’s case. Garden Cottage Foods Ltd v Milk Marketing Board [1984] AC 130 likewise concerned direct effects between private undertakings and did not govern State liability.
4. Sufficient seriousness. The inquiry focused on the seriousness of the breach, not simply the seriousness of its consequences. The court considered the factors identified in R (o.a.o. Negassi and another) v Secretary of State for the Home Department [2013] EWCA Civ 151, including the importance, clarity and precision of the rule, the excusability and intention of the error, relevant judgments, subsequent conduct, affected persons and the position of EU institutions. The absence of discretion did not make liability automatic.
5. TDC’s pleaded and proposed case did not carry sufficient conviction. The alleged breach was not shown to be deliberate or inexcusable. The selectivity issue was at least strongly arguable, and neither the Commission nor another EU institution had determined that the arrangements were unlawful State aid. TDC’s damages claim therefore had no real prospect of success.
6. Other relief. A mandatory injunction could not enforce EU State aid rules after those rules ceased to apply. Declaratory relief, standing without a viable damages claim, would have only historic or academic significance and had no real prospect of being granted.
7. The claims for damages, declarations and injunctions were dismissed, and summary judgment was entered for the Council.