Coal Authority v HJ Banks & Company Ltd

JurisdictionEngland & Wales
JudgeLord Justice Ward,Lord Justice Laws,Lord Justice Mance
Judgment Date13 June 2002
Neutral Citation[2002] EWCA Civ 841
Date13 June 2002
CourtCourt of Appeal (Civil Division)
Docket NumberCase No: A3/1997/0408

[2002] EWCA Civ 841

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM QUEEN'S BENCH DIVISION

(Mr Justice Tuckey)

Before

Lord Justice Ward

Lord Justice Laws and

Lord Justice Mance

Case No: A3/1997/0408

Between
H.j. Banks & Co. Ltd.
Appellant
and
(1) the Coal Authority
(2) the Secretary of State
Respondents

Mark Hoskins (instructed by Eversheds, Dean Street, Newcastle) for the Appellant

David Vaughan Q.C. and David Lloyd Jones Q.C. (instructed by Sally Brook Shanahan, The Solicitor, The Coal Authority, 200 Lichfield Lane, Mansfield, Notts., NG18 4RG) for the Coal Authority

Richard Plender Q.C. and Aidan Robertson (instructed by the Treasury Solicitor) for the Secretary of State

Lord Justice Ward
1

This could be the last round in a titanic struggle between H.J. Banks & Co. Ltd. (to whom I shall refer simply as "Banks") and the Coal Authority and the Secretary of State for Trade and Industry. It is an appeal from the order of Tuckey J., as he then was, made on 20 th December 1996 whereby summary judgment was entered for the Coal Authority against Banks and the counterclaim brought by Banks against the Coal Authority and the Secretary of State was struck out, Banks having to pay the costs. The judge gave leave to appeal and that appeal came before this court (coram Hirst L.J., Sir Christopher Staughton and me). On 31 st July 1998 we referred four questions to the European Court of Justice and on 20 th September 2001, the Court of Justice gave judgment and pronounced upon those four questions. Thus the matter comes back before us for the final determination of the appeal.

The Background.

2

The background is set out in the judgment of Hirst L.J. and in the judgment of the Court of Justice in case C-390/98. I will set it out again as shortly as possible. After the nationalisation of the coal industry in 1946 virtually all coal reserves in the United Kingdom vested in the British Coal Corporation, formerly known as the National Coal Board. The Corporation was, however, empowered pursuant to section 36(2)(c) of the Coal Industry Nationalisation Act 1946 (added by virtue of the Opencast Coal Act 1958, s. 46(1) and subsequently amended by the Coal Industry Act 1990, s. 4(1)(b))to grant licences for opencast mining (the "section 36 licences") to private operators who paid royalties to the Corporation in respect of the coal which they worked. Banks was such an operator.

3

The industry was then privatised by the Coal Industry Act 1994. A new regulatory body, the Coal Authority, was created and all the unworked coal and coal mines previously vested in the British Coal Corporation were transferred to the Coal Authority. As from the restructuring date, 31 st October 1994, mining operations were to be carried out either under new licences or leases (the "CIA licences" and "CIA leases") or under the pre-existing section 36 licences.

4

The actual restructuring of the coal industry took place in this way. With effect from the restructuring date, 31 st October 1994, the Secretary of State granted British Coal Corporation the operating licences and directed the Coal Authority to grant leases it needed to carry on its pre-privatisation business including opencast mining but these licences and leases were granted for no consideration and the rent was a peppercorn. In December 1994 the operating business of the Corporation was distributed among various "successor companies" owned by the Crown, one of which was Central and Northern Mining Ltd. which was granted the entire English business of the Corporation, including its licences and leases and again for no consideration but for the peppercorn if called upon to pay it. Those successor companies including Central and Northern Mining Ltd. were then sold after an open competitive tendering process. Central and Northern Mining Ltd. was acquired by R.J.B. Mining plc and changed its name to R.J.B. Mining (U.K.) Ltd. It was not required to make any further payments for the right to work coal under the British Coal Corporation licences and leases which were transferred to it. Banks was aware of the proposals for that sale but did not tender.

5

Banks carried on under its section 36 licences and continued paying its royalties, but now to the Coal Authority. Section 36 licence holders were given the option of converting them into licences under the 1994 Act and to acquire leases. Holders of those CIA licenses and leases had to pay a licence fee as well as production related rents or advance lump sum payments of some kind. All payments received by the Coal Authority were paid over to the Secretary of State except to the extent that the Authority is permitted by the Secretary of State to retain receipts as a contribution towards administration expenses. Banks exercised that option in relation to one site.

6

Banks is a member of a trade association, the National Association of Licensed Opencast Operators ("NALOO"). Mr Banks was its chairman. In August 1994 NALOO complained to the Commission of the European Communities of preferential treatment by the British authorities to British Coal Corporation to the detriment of small private opencast mine operators. NALOO complained that the Corporation, with whom the NALOO members were in competition, had enjoyed discriminatory State aid since 1973 and that:—

"Commission intervention is urgently required to prevent the current privatisation plans exacerbating the abuses … If NALOO is correct there is a serious danger of British Coal merely being replaced by five regionally dominant aid advantaged companies and a serious risk of disappearance of the established private sector altogether."

On 1 st November 1994 the Commission issued its decision approving the privatisation proposals as being compatible with the objectives of its earlier Decision 3632/93 and with the proper functioning of the Common Market. On 21 st December 1994 the Commission approved the acquisition by R.J.B. Mining of the share capital of the successor companies for which it had bid. On 4 th May 1995 the Commission responded to NALOO's complaint and concluded by saying:—

"In the light of these considerations and with regard to those matters raised in [the complaint] related to State aid, we do not consider that at present there are sufficient grounds for intervention by the Commission."

In answer to a further query from NALOO's solicitors, the Commission, in a letter dated 14 th July 1995, clarified the response that it had given in its letter of 4 th May 1995.

The Claim and Counterclaim.

7

When Banks refused to pay royalties under the section 36 licences, these proceedings began with the issue of a writ on 24 th January 1996 in which the Coal Authority claimed against Banks some £334,000 as payment of the royalties due from October 1995 to January 1996, and in a second writ a further sum of over £666,000 was claimed from February 1996 to the date of those proceedings. So it was a claim for over £1m.

8

The defence to that claim was that the sums claimed were unlawful and therefore unenforceable for two reasons. The first was that the levying of the section 36 royalties on Banks was a measure or practice which discriminated between producers contrary to Article 4(b) of the ECSC Treaty and further or alternatively was contrary to the general principle of equality which is a fundamental principle of the law of the European Union. The particulars of the first ground were that whereas the Coal Authority levied section 36 royalties on Banks in respect of all coal which it extracted pursuant to such licences, the Coal Authority did not levy royalties equivalent to section 36 royalties or any royalties or any payments whatsoever on the successor companies in respect of their opencast mining operations carried out under the leases and licences granted on privatisation (save for the annual rent of one peppercorn if demanded). The second ground was that the section 36 royalties claimed by the Coal Authority from Banks constituted special charges imposed by an emanation of the State contrary to Article 4(c) of the ECSC Treaty which again affected unequally the production costs of Banks and the successor company.

9

Banks made a counterclaim against the Coal Authority and the Secretary of State for Trade and Industry claiming in the first place restitution of the sum of about £863,000. That sum was made up first as to the section 36 royalties paid since the restructuring date, 31 st October 1994 and secondly as to the licence fees, production rents and advance payments made under the CIA licences and leases. Banks contended that the levying of those royalties, rents and payments by the Coal Authority, and their receipt by the Secretary of State constituted a measure or practice which discriminated between producers contrary to Article 4(b) of the ECSC Treaty or alternatively contrary to the general principle of equality. Banks again relied on the disparity between the payments it was required to make and those the successor companies made in respect of their opencast mining operations under the leases and licences granted on privatisation. Alternatively it was again suggested that the royalties, rents and payments levied on Banks constituted special charges imposed by the State contrary to Article 4(c) of the ECSC Treaty and affected unequally the production costs of Banks and the successor companies. It was alleged that the payments were made pursuant to an ultra vires or unlawful demand and by mistake leading to the unjust enrichment of the Coal Authority and the Secretary of State.

10

Banks also claimed damages against the Coal Authority and the...

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