The Durham Company Limited v Durham County Council

For damages based on breach of directly effective EU law, the breach must satisfy the conditions for State liability, including sufficient seriousness. That issue is assessed as a matter of fact and circumstance. The importance of the rule, or limited discretion, is not automatically decisive. A claimant must plead a plausible case of intentional or reckless conduct; lack of disclosure cannot replace that case. An arguable legal position, uncertain application of the State aid rules, and the absence of supporting authority or institutional findings may make an assumed breach insufficiently serious. A late procedural point may be excluded as an independent summary-judgment ground but considered when assessing seriousness. A declaration concerning past EU State aid law may be academic after those rules cease to apply.

The Durham Company Limited appealed from summary judgment granted by HHJ Keyser QC in the High Court, which dismissed its claim against Durham County Council for breach of Article 108(3) TFEU and refused permission to amend its pleadings. The claim alleged that the Council had cross-subsidised commercial waste collection through its household waste service, thereby granting unlawful State aid.

The appeal concerned whether the Council could rely on an insufficiently notified selectivity argument, whether any assumed breach could be sufficiently serious to support Francovich damages, and whether declaratory relief concerning the past EU-law position would serve a useful purpose.

Majority

1. The appeal was dismissed. Lord Justice Arnold delivered the principal judgment, with Lord Justice Coulson agreeing in the result and addressing reservations about the selectivity argument.
2. A breach of the directly effective final sentence of Article 108(3) TFEU is not actionable in damages merely because a breach is established. The conditions for State liability include a sufficiently serious breach and a direct causal link between the breach and the loss. The sufficient-seriousness question is multifactorial. The importance and clarity of the State aid rules, the degree of discretion, excusability, relevant judgments, intention, conduct after awareness, persons affected and the position of EU institutions are relevant. No single factor is necessarily decisive.
3. The judge was entitled to assess the apparent strength of the Council’s unresolved selectivity argument when considering seriousness, without deciding whether the selectivity condition was satisfied. The Council’s position was strongly arguable because the Environmental Protection Act 1990 established a special regime for local-authority waste collection, with duties and constraints not applicable to private operators. TDC had not pleaded a realistic case of intentional or reckless conduct. The Council’s assumed breach therefore had to be treated as unintentional. The absence of supporting authority or an EU institutional finding, together with the uncertainty of applying the State aid rules in this context, meant that TDC had no real prospect of establishing sufficient seriousness.
4. There was no procedural inconsistency in excluding the selectivity argument as an independently notified ground for summary judgment while considering its apparent strength in the separate assessment of seriousness. A declaration about past EU State aid law would be academic after the EU State aid rules ceased to apply to the United Kingdom and a different domestic subsidy regime was proposed.

Dissent

Lord Justice Edis agreed on Grounds 2 and 3 but would have allowed the appeal on Ground 1 and dismissed the summary-judgment application. He considered that seriousness was a fact-and-circumstance issue and that the Council’s reasons for the assumed breach, being matters within its knowledge and unsupported by evidence or disclosure, could not fairly be resolved summarily. He acknowledged that the claim was likely to fail and that the Council might seek an earlier determination after providing evidence.

1. Court of Appeal (Civil Division): The appeal was dismissed. The High Court’s summary judgment order remained in force.
2. High Court of Justice, Business and Property Courts, Competition List (ChD): HHJ Keyser QC granted summary judgment dismissing the claim and refused the proposed amendment, in a judgment reported at [2020] EWHC 3200 (Ch).