When do contracts and goodwill amount to A1P1 possession?

9 October 2019

The Technology & Construction Court's decision in Solaria v Department for Business, Energy and Industrial Strategy [2019] EWHC 2188 (TCC).
 
In this case, a government department was granted summary judgment against a claimant (Solaria) who had no real prospect of succeeding in a damages claim based on an alleged unlawful interference with the right to peaceful enjoyment of possessions under Article 1 of the First Protocol (A1P1) of the European Convention on Human Rights (ECHR).
 
The Technology & Construction Court held that Solaria’s contractual interests did not amount to “possessions” for the purposes of A1P1. Moreover, Solaria did not comply with the time limits under section 7(5) of the Human Rights Act 1998. The case is a convenient reminder of the current state of the law in determining what a possession is under A1P1 and how the courts apply time limits in human rights claims.
 

Background

In October 2011, the Department of Energy and Climate Change (now the Department for Business, Energy and Industrial Strategy) published a consultation document containing a proposal (the Proposal) to significantly cut the subsidy payable for electricity generated from renewable sources, including from solar photovoltaic (PV) installations. This followed an unusually high uptake of a scheme aimed at encouraging low-carbon generation of electricity. 
 
Many solar PV installation companies brought joined civil claims for damages (the Breyer group litigation). In April 2015, the Court of Appeal confirmed that the October 2011 consultation proposal interfered with solar PV companies’ possessions, in breach of A1P1. The Court of Appeal rejected the government’s argument that only a final decision could amount to an interference and held that the proposal “interfered in a real and practical sense with the solar PV companies’ businesses in precisely the way that was intended”. Even though the interference was prescribed by law, it was unjustified and disproportionate as the consultation proposal failed to strike a fair balance between the public interest and interests of solar PV installation companies, and therefore violated A1P1 of the ECHR.
 
The October 2011 proposal was never implemented and the government settled the litigation claims before trial for nearly £60 million.
 

Facts of the present case

In July 2011, Solaria entered into a sub-contract with a company (G) for the supply of PV panels under which G was obliged to pay the contract price for contracted works and an additional 300 house installations. However, Solaria argued that, due to the Proposal, it had agreed in November 2011 to reduce the price. It argued that the benefit of the contract and/or goodwill was part of Solaria’s business and that providing goods and services under the contract was a possession under A1P1. 
 
Solaria wrote a formal letter of claim on 21 December 2016 and issued the claim on 21 December 2018. Solaria argued that the government’s settlement in the Breyer group litigation supported its claim.
 
The Court had to decide whether
 
  1. the contractual interests Solaria relied on amounted to “possessions” for the purposes of A1P1; 
  2. the claim was out of time.

Judgment

The Court followed precedent and held that a contractual right that is intangible, not assignable, not transmissible and not realisable cannot be described as an “asset” and cannot count as a “possession” for the purposes of A1P1. The Court had to determine whether Solaria’s contractual rights had a monetary value which could be marketed for consideration. Under this specific contract Solaria had agreed not to assign the sub-contract or any contractual rights without G’s prior written consent. Therefore, Solaria’s contractual rights lacked the attributes of an asset and could not be categorised as A1P1. 
 
As to the goodwill argument, the Court again followed precedent and held that, to qualify as a possession for the purposes of A1P1, goodwill must have a monetary value separate from that of the tangible assets of the business. Moreover, the value must be capable of being realised on sale, assignment or other dealing. In this case, the Court was not satisfied that the value of the sub-contract had in fact been treated as part of Solaria’s marketable goodwill. In regards to the additional 300 PV installations, damages could not be recovered as no firm order had been placed and no contract had been concluded.
 

Limitation

Similarly to the decision in Mott case, which you can read more about in our blog In deep water: High Court decides on level of compensation for interference with fishing quotas, the judicial review failed because it was brought extremely late. Solaria failed to justify the delay and could not persuade the court that it was “equitable” for the claim to proceed even after the limitation period had passed. 
 
In this case, the claim should have been brought by 30 October 2012, and even allowing the Standstill Agreement entered into by both Solaria and the governmental department in late 2017, Solaria brought the claim 4 years and 11 months late. The Government raised a limitation defence under section 7(5) of the Human Rights Act 1998, which states that proceedings must be brought within one year, unless the court considers that a longer period is equitable.
 
It was held that the Court could exercise a wide discretion to produce an equitable decision, taking into account the types of factors listed in the Limitation Act 1980 S.33, including the length and reasons for the delay. However, the Court accepted that the one year limitation period was a clear indication that claims against public authorities should be brought promptly and any other reading of it was unsustainable. There was clearly prejudice to the defendant; if the claimant had acted promptly, its claim could have been managed alongside the ones in Breyer.
 

 

Further information

We regularly represent parties in judicial review challenges. Our lawyers also blog regularly about public law matters, including in relation to the impact of Brexit. Read our Public Law blog and Brexit blog for the latest commentary.
 
Should you have any questions about the issues covered in this blog, please contact Adam Chapman or a member of our Public Law team.
 

About the authors

Nick Wrightson is a Senior Associate in our Public Law team. Nick has an administrative and public law practice focused on judicial review litigation and supporting clients through public inquiriesNick’s experience includes representing public bodies, private companies, individuals, representative bodies and charities – often in high stakes, politically and commercially sensitive cases.

Bianca Patulea Paralegal within the Public Law team. Prior to joining Kingsley Napley, she worked at the International Bar Association’s Human Rights Institute where she focussed on issues relating to human rights, judicial independence and the rule of law.

 

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