Commercial judicial review on legitimate expectation and A1P1 (unlawful interference with property rights and potential damages) to proceed to a full hearing

Commercial judicial review on legitimate expectation and A1P1 (unlawful interference with property rights and potential damages) to proceed to a full hearing

CategoryNews Author Duncan Sinclair, Katherine Barnes Date

The Claimants, two companies investing and operating in the renewable energy sector, developed a model for the installation and maintenance of renewable boilers through which they received subsidies from the energy regulator (Ofgem) under the Domestic Renewable Heat Incentive Scheme Regulations 2014. Ofgem confirmed on various occasions that the model was compliant with the relevant regulatory framework, and for several years the companies duly received the subsidies.

The Claimants, relying on the promises and assurances by Ofgem, invested some tens of millions of pounds installing renewable boilers, accrediting them, and overseeing maintenance at virtually no cost to their customers (homeowners).

However, despite no customer complaints and approving subsidy payments to the Claimants of millions of pounds under the model, Ofgem subsequently stated that it had misinterpreted the applicable legislation. The misinterpretation was not said to relate to the accreditation of installations (which remained valid), nor even as to sums payable.  Rather, it concerned Ofgem’s payments into agreed bank accounts under the model. Specifically, Ofgem now considered that it is not permitted by the legal framework to make payments to bank accounts other than those controlled by the customers themselves.

This led Ofgem to stop paying the subsidies to the companies and to refuse to treat the companies as having any role in the regulatory framework.  This was despite Ofgem having previously accepted that the Claimants (with signed agreements) could represent the consumers in navigating the various regulatory requirements. Ofgem contends that it has no choice in this regard, because to do otherwise would be contrary to the applicable legal framework as to the bank accounts to which payments may be made, and therefore ultra vires.

The companies contend that a legitimate expectation has arisen in respect of the model’s compliance with the regulatory framework by virtue of express promises and conduct from Ofgem to that effect. As such:

  1. In failing to give effect to the legitimate expectation Ofgem has acted contrary to the common law, particularly in circumstances where (unlike in Rowland v Environment Agency[2003] EWCA Civ 1885) the basis for Ofgem’s “ultra vires” argument is secondary rather than primary legislation;
  2. In any event, the legitimate expectation is a property right protected by Article 1 of Protocol 1 of the ECHR. Therefore, s.6 and s.3 Human Rights Act 1998 compel the 2014 Regulations to be read in a manner which is consistent with the protection of the companies’ A1P1 rights. Further or alternatively, even if domestic legislation precludes the honouring of the legitimate expectation, the companies are none the less entitled to “just satisfaction” (i.e. damages) for the unjustified and disproportionate interference with the companies’ A1P1 rights as per Pine Valley Developments Ltd v Ireland(1991) 14 EHRR 319 and Stretch v United Kingdom (2003) 38 EHRR 196.

The matter came before Mr Justice Fordham at an oral renewal hearing on 16 June 2020. The Judge gave a detailed ex tempore judgment, in which he explained that in his view both of the grounds advanced by the Claimant were arguable. However, in view of a dispute about alleged delay in bringing the claim, which required careful examination of detailed evidence and was also of relevance to the issue of remedy, he ordered a rolled-up hearing.

This matter will of interest to public law practitioners, particularly those specialising in commercial judicial review, given the controversy and uncertainty surrounding the common law principle that no “legitimate” expectation can arise where honouring the expectation would be ultra vires. Similarly, there is a dearth of domestic authority on the way in which A1P1 applies in the context of an “ultra vires” legitimate expectation.

Duncan Sinclair and Katherine Barnes act for the Claimant companies, instructed by Omar Qureshi at Cameron McKenna Nabarro.

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