Durham County Council v The Durham Company Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Julian Flaux C,Lord Justice Nugee,Lord Justice Newey |
| Judgment Date | 26 June 2023 |
| Neutral Citation | [2023] EWCA Civ 729 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2023-000770 |
[2023] EWCA Civ 729
Sir Julian Flaux, CHANCELLOR OF THE HIGH COURT
Lord Justice Newey
and
Lord Justice Nugee
Case No: CA-2023-000770
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE COMPETITION APPEAL TRIBUNAL
(SIR MARCUS SMITH, PRESIDENT)
[2023] CAT 14
Royal Courts of Justice
Strand, London, WC2A 2LL
Jamie Carpenter KC and Richard Howell (instructed by DWF Law LLP) for the Appellant
Michael Bowsher KC and Ligia Osepciu (instructed by Tilly Bailey & Irvine LLP) for the Respondent
Hearing date: 6 June 2023
APPROVED JUDGMENT
Introduction
The present claim before the Competition Appeal Tribunal (“the CAT”) by the Durham Company Limited (trading as Max Recycle) against the Durham County Council (“the Council”) is the first application for statutory judicial review under section 70 of the Subsidy Control Act 2022 (“the 2022 Act”). The Council appeals, with the permission of Sir Marcus Smith the President of the CAT, his decision dated 21 March 2023, following a case management conference (“CMC”) on 17 February 2023, imposing a cap on the Council's recoverable costs of the proceedings incurred after the case management conference at £60,000. The Council advances four grounds of appeal (set out below). The judge did not consider that any of them had a real prospect of success but gave permission to advance them on the basis that it was important that the Court of Appeal should determine whether the general guidance as to the appropriateness of cost capping in subsidy control cases which the judge was seeking to give was correct.
Factual and legal background
Max Recycle is a family run waste disposal company in County Durham with 39 employees. The Council is the waste collection authority for the county. Pursuant to its statutory obligations, the Council collects household waste from residential premises without a charge (other than through council tax), save in miscellaneous cases. It also collects “trade waste”, which is common waste produced by businesses and commercial premises as distinct from specialist waste and which Max Recycle alleges is a subset of commercial waste. The Council's case is that it collects all forms of commercial waste. The Council does charge businesses for its collection of their trade waste, a service which it provides in competition with private sector providers such as Max Recycle.
Max Recycle contends that the Council's charging practices for the collection of trade waste are an unlawful cross-subsidy whereby its commercial trade waste operation is subsidised by its non-commercial household waste operation. It contends that the Council charges trade waste customers non-commercial, below market rates which it could not sustain if it operated a standalone business collecting and disposing of only trade waste.
Max Recycle initially sought to challenge the Council's operation under the State aid rules in force pre-Brexit. Following ultimately abortive judicial review proceedings begun in 2014 and unsuccessful complaints to the European Commission in 2018, Max Recycle brought a claim against the Council in 2020 alleging a ‘ Francovich’ breach of EU state aid law. The claim failed in the Chancery Division ( [2020] EWHC 3200 (Ch)) and in the Court of Appeal ( [2022] EWCA Civ 66), in consequence of which Max Recycle was ordered to pay the Council's substantial costs. Neither the judgment at first instance nor that in the Court of Appeal purported to determine whether the Council's arrangements amount to State aid.
Following the end of the Transition Period on 31 December 2020, the EU law of State aid ceased to have effect in the United Kingdom. Under Article 366 of the Trade and Cooperation Agreement (“the TCA”) the UK government assumed an international obligation to put in place and maintain a system of subsidy control which ensured that the granting of a subsidy respected certain principles. The provisions have effect in domestic law by virtue of section 29(1) of the European Union (Future Relationship) Act 2020. Two substantial judicial reviews have taken place in relation to compliance with Article 366. In R (British Sugar) v Secretary of State for International Trade [2022] EWHC 393 (Admin), Foxton J heard an unsuccessful challenge over two days of hearing to an autonomous tariff quota for imports of raw cane sugar. In R (British Gas Trading) v Secretary of State for Energy [2023] EWHC 737 (Admin), a number of energy suppliers challenged the decision to transfer the business of Bulb Energy to Octopus Energy. The Divisional Court (Singh LJ and Foxton J) heard the claim over three days and dismissed it on grounds of delay. They would have rejected the claim on the merits as well.
On 4 January 2023, the substantive provisions of the 2022 Act came into force, replacing the transitional provisions under the TCA. Section 12 of the Act imposes a duty on a public authority in these terms:
“(1) A public authority—
(a) must consider the subsidy control principles before deciding to give a subsidy, and
(b) must not give the subsidy unless it is of the view that the subsidy is consistent with those principles.
(2) In subsection (1) “subsidy” does not include a subsidy given under a subsidy scheme.
(3) A public authority—
(a) must consider the subsidy control principles before making a subsidy scheme, and
(b) must not make the scheme unless it is of the view that the subsidies provided for by the scheme will be consistent with those principles.”
Part 5 of the Act, headed “Enforcement”, provides for appeals to the CAT. Section 70 provides:
“Review of subsidy decisions
(1) An interested party who is aggrieved by the making of a subsidy decision may apply to the Competition Appeal Tribunal for a review of the decision.
(2) Where an application for a review of a subsidy decision relates to a subsidy given under a subsidy scheme, the application must be made for a review of the decision to make the subsidy scheme (and may not be made in respect of a decision to give a subsidy under that scheme).
…
(5) In determining the application, the Tribunal must apply the same principles as would be applied—
(a) in the case of proceedings in England and Wales or Northern Ireland, by the High Court in determining proceedings on judicial review;
…
(7) In this Part—
“interested party” means—
(a) a person whose interests may be affected by the giving of the subsidy or the making of the subsidy scheme in respect of which the application under subsection (1) is made, or
(b) the Secretary of State;
“subsidy decision” means a decision to give a subsidy or make a subsidy scheme;
“the Tribunal” means the Competition Appeal Tribunal;
“Tribunal Procedure Rules” means rules made under section 15 of the Enterprise Act 2002.”
Section 75 provides that an appeal lies to this Court on any point of law arising from any decision of the CAT.
On 3 February 2023, Max Recycle filed a Notice of Appeal under section 70 of the 2022 Act to the CAT against what it characterises as the Council's decision to grant what is alleged to be an unlawful cross-subsidy to its own trade waste business, by allowing it to use the employees and assets of the Council's publicly funded household waste business for less than a market price.
The CAT fixed the CMC for 17 February 2023. Prior to the hearing, the judge circulated a draft directions order which included a provision capping each party's costs at £50,000. At the hearing, the President explained the rationale for the proposed cap: “The one thing one doesn't want to have is for the financial advantages of subsidies to be subsumed in challenges to their making or not making in terms of legal cost”. The Council opposed the imposition of any cap. The judge requested written submissions from both parties on the issue, which he said were to: “consider not merely the operation in principle of the regime, but what, if I were to go down this route, the appropriate caps ought to be in each case.”
The parties filed written submissions. The Council continued to oppose any cap but said in relation to what an appropriate cap would be no more than: “it should be based upon a generous estimate of the upper limit” of a reasonable and proportionate amount, and that: “as a matter of fairness any cost cap must also be reciprocal”. However, the Council did not provide any statement of its costs to date or any estimate of its future costs through to the conclusion of a substantive hearing.
The judgment below
On 21 March 2023, the judge handed down his judgment on costs capping. Under the heading “General Principles”, the judge at [3] made some general observations about the nature of applications under section 70 of the 2022 Act, stating that: (i) the issues are likely to be narrow; (ii) the nature of the issues is unlikely to require extensive disclosure and evidence; (iii) the jurisdiction should be fast, cheap and simple; and (iv) the jurisdiction should generally be seen through the lens of the fast-track procedure in Rule 58 of the Competition Appeal Tribunal Rules 2015 (“the CAT Rules”).
He then summarised the Council's submissions opposing any costs capping before turning to his analysis. He noted at [7] that it was conceded rightly by the Council that there was jurisdiction in the CAT to make a costs capping order, arising out of Rule 19(2)(r) of the CAT Rules which provides that the CAT may give directions: “for the costs management of proceedings, including for the provision of such schedules of incurred and estimated costs as the Tribunal thinks fit.” He pointed out that in Belle Lingerie v Wacoal [2022] CAT 24 (“ Belle Lingerie”), the CAT had held that a costs capping jurisdiction arose out of the identically worded Rule 53(2)(m).
The judge then considered whether...
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