Robert Croxen & Ors v Gas and Electricity Markets Authority & Ors

A supplier’s renewables obligation comprises a primary obligation to provide renewable obligation certificates and a secondary obligation to make a buyout payment for any shortfall. Before the payment date, the monetary liability is contingent; thereafter it is an actual liability, with interest accruing on unpaid sums. The liability continues after the late payment period and is unaffected by mutualisation.

A supplier of last resort which honours the credit balances of a failed supplier’s customers may obtain restitutionary relief by equitable subrogation. The payment must discharge the failed supplier’s debt and be made on request, with authority or ratification, or under sufficient legal compulsion. A last resort supply payment does not prevent the enrichment being at the SoLR’s expense, and passing-on is not a defence to unjust enrichment.

The officeholders of ten failed energy suppliers sought directions concerning two groups of issues. The first concerned the construction of the Renewables Obligation Order 2015 and the provability and continuing nature of liabilities arising from a supplier’s failure to provide renewable obligation certificates or make the required payments.

The second concerned whether suppliers of last resort could claim against failed suppliers after honouring customers’ credit balances, including where the SoLR had committed to do so before appointment and could seek a Last Resort Supply Payment. A further issue concerned possible proprietary claims relating to direct debit payments received after licence revocation.

1. The renewables obligation imposed by Articles 7 and 67 of the Renewables Obligation Order 2015 comprises a primary obligation to provide ROCs and a secondary obligation to make a buyout payment to the Authority for any shortfall. Before 1 September in the settlement period, the payment liability is contingent on the supplier failing to provide the requisite ROCs. From 1 September it is an actual liability, and interest becomes payable on unpaid sums as it accrues.

2. The payment liability is not extinguished by the end of the late payment period, by the triggering of mutualisation, or by payments made under the mutualisation scheme. The absence of machinery for dealing with payments made after 31 October creates a lacuna, but does not justify terminating a liability which the statutory scheme expressly preserves. Licence revocation after the relevant obligation period likewise does not remove the liability.

3. Applying the structured approach in Banque Financiere de la Cite v Parc (Battersea) Ltd and Investment Trust Companies v Revenue & Customs Comrs, a SoLR’s payment of customer credit balances enriched the failed supplier by discharging its debt to customers. The payment was implicitly requested or ratified in the regulatory context, including the failed supplier’s participation in the licensing regime and its provision of customer information. Alternatively, the SoLR was under sufficient legal compulsion through the applicable licence conditions and regulatory enforcement framework. The same matters supplied the relevant unjust factor.

4. The enrichment was at the SoLR’s expense. The discharge of the failed supplier’s debt was the essential consequence of the SoLR’s expenditure, rather than an incidental benefit. The possibility of reimbursement through a Last Resort Supply Payment was irrelevant to that inquiry. Passing-on is not recognised as a defence to unjust enrichment.

5. The SoLR’s remedy was an equitable right of subrogation to the customers’ claims against the failed supplier. Acceptance of payment by customers alone would not have discharged the failed supplier’s debt, following Electricity Supply Nominees Ltd v Thorn and Cantrave Ltd v Lloyds Bank plc. Issue 12 was left unanswered because the assumed facts and evidence were insufficient to determine a proprietary claim in constructive trust.