The Durham Company Ltd v Durham County Council
| Jurisdiction | England & Wales |
| Judge | Lord Justice Coulson,Lord Justice Edis,Lord Justice Arnold |
| Judgment Date | 01 February 2022 |
| Neutral Citation | [2022] EWCA Civ 66 |
| Docket Number | Case No: A3/2021/0249 |
| Court | Court of Appeal (Civil Division) |
[2022] EWCA Civ 66
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE, BUSINESS AND PROPERTY
COURTS OF ENGLAND AND WALES, COMPETITION LIST (ChD)
His Honour Judge Keyser QC
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Coulson
Lord Justice Arnold
and
Lord Justice Edis
Case No: A3/2021/0249
Michael Bowsher QC and Ligia Osepciu (instructed by Tilly Bailey & Irvine LLP) for the Appellant
Aidan Robertson QC (instructed by DWF Law LLP) for the Respondent
Hearing date: 18 January 2022
Approved Judgment
This judgment was handed down remotely at 10.30 on 1 February 2020 by circulation to the parties or their representatives by email and by release to BAILII and the National Archives.
Introduction
This is an appeal by The Durham Co Ltd trading as Max Recycle (“TDC”) against an order made by HHJ Keyser QC sitting as a Judge of the High Court on 25 November 2020 granting Durham County Council (“the Council”) summary judgment dismissing TDC's claim for breach of Article 108(3) of the Treaty on the Functioning of the European Union (“TFEU”) for the reasons given in the judge's judgment of the same date [2020] EWHC 3200 (Ch). TDC originally claimed (i) a declaration, (ii) an injunction and (iii) damages. There is no challenge by TDC to the judge's dismissal of the claim for an injunction. Since the proceedings were commenced on 22 January 2020, it is common ground that the claim for damages is unaffected by Brexit, but as I shall explain this is not true of the claim for a declaration if the claim for damages is dismissed.
Factual background
TDC carries on business in the provision of commercial waste services in Northern England and Scotland, and in particular within County Durham.
The Council is the waste collection authority for County Durham for the purposes of the Environmental Protection Act 1990 (“the EPA”). Section 45 of the EPA provides, so far as material, as follows:
“(1) It shall be the duty of each waste collection authority—
(a) to arrange for the collection of household waste in its area except waste—
(i) which is situated at a place which in the opinion of the authority is so isolated or inaccessible that the cost of collecting it would be unreasonably high, and
(ii) as to which the authority is satisfied that adequate arrangements for its disposal have been or can reasonably be expected to be made by a person who controls the waste;
(b) if requested by the occupier of premises in its area to collect any commercial waste from the premises, to arrange for the collection of the waste; …
…
(3) No charge shall be made for the collection of household waste except in cases prescribed in regulations made by the Secretary of State; and in any of those cases—
(a) the duty to arrange for the collection of the waste shall not arise until a person who controls the waste requests the authority to collect it; and
(b) the authority may recover a reasonable charge for the collection of the waste from the person who made the request.
(4) A person at whose request waste other than household waste is collected under this section shall be liable to pay a reasonable charge for the collection and disposal of the waste to the authority which arranged for its collection; and it shall be the duty of that authority to recover the charge unless in the case of a charge in respect of commercial waste the authority considers it inappropriate to do so.”
At all times relevant to this case, the Council discharged its duty in respect of household waste by providing household waste collection services directly rather than by outsourcing them to a third party. It also provided some commercial waste collection services directly to premises in County Durham, specifically the collection of so-called “trade waste” that is disposed of in wheelie bins. The Council did not charge for its household waste collection services, except in the limited cases where a charge is permitted. It did charge for its commercial waste collection services.
The Council had a single fleet of 86 waste collection vehicles and a workforce of 275 employees, which it says was the number of vehicles and staff required to provide its household waste collection services. The costs of providing those services were primarily met from the Council's general revenues, and in particular from the revenues raised by Council Tax.
For the purpose of providing its commercial waste collection services, the Council used the same vehicles, personnel and other resources that were used for the provision of household waste collection services. The Council disposed of household and commercial waste together, using the same long-term disposal contracts. The Council says that, prior to the 2020/21 financial year, it did not keep separate accounts of its costs and revenues for providing household waste collection services on the one hand and commercial waste collection services on the other hand.
TDC complains that the Council's charges for commercial waste collection services of a given nature, frequency and volume were lower than TDC's charges for commercial waste collection services of a similar nature, frequency and volume. It alleges that, as a result, over the course of the six years preceding the issue of the claim form it lost significant business from customers who purchased commercial waste collection services from the Council instead of from TDC.
TDC contends that the Council was able to charge lower prices for its commercial waste collection services than TDC because the Council used the same infrastructure for providing those services as it did for providing its household waste collection services and thereby cross-subsidised the provision of its commercial waste collection services out of its general revenues, and in particular its revenues from Council Tax. TDC further contends that this amounted to the provision of State aid contrary to EU law.
TDC accepts, however, that the Council also benefitted from a tax advantage that is attractive to some customers, which is that the Council's commercial waste collection services are exempt from VAT whereas TDC's services are subject to VAT. Prior to the commencement of these proceedings TDC brought a claim for judicial review of the lawfulness of the VAT treatment applied by Her Majesty's Revenue and Customs to local authorities carrying out commercial waste collection and disposal services. TDC contended that such services provided by local authorities were properly subject to VAT. On 19 September 2016 Warren J sitting in the Upper Tribunal (Tax and Chancery Chamber) ruled that, where a local authority made supplies of trade waste collection services to business customers in its area and did so in the performance of its duties under section 45(1)(b) of the EPA, the supplies were “activities in which it is engaged as a public authority” within the meaning of section 41A(a) of the Value Added Tax Act 1994 and Article 13(1) of the Principal VAT Directive, and therefore were not subject to VAT: see R (on the application of The Durham Co Ltd) v Commissioners for HM Revenue and Customs [2016] UKUT 417 (TCC), [2017] STC 264. On 25 April 2018 Nugee J refused TDC permission to appeal against Warren J's decision: [2018] UKUT 188 (TCC), [2018] BTC 517.
TDC's complaint to the European Commission
On 30 July 2018 TDC made a complaint to the European Commission alleging a breach of the State aid rules by the Council. On 24 November 2020 the Directorate General for Competition (“DG Comp”) sent TDC a letter setting out its preliminary assessment that “examination of the facts at this juncture has not led to the conclusion or doubts that there would have been cross-subsidisation between the [Council's] household waste collection service and the commercial waste collection service”. This letter was received by TDC on 25 November 2020, but was not before the judge when he made the order under appeal, although he was informed of it when making consequential orders on 27 November 2020.
TDC replied to DG Comp's letter on 23 December 2021 making further submissions, but on 16 June 2021 DG Comp sent a further letter stating that its preliminary view was that “the available information does not provide sufficient grounds to show the existence of unlawful aid”. TDC replied to the Commission's letter on 15 July 2021 making yet further submissions, but we were informed that there had been no further communication from DG Comp by the time of the hearing before us.
As matters stand, therefore, DG Comp has twice expressed a preliminary view that there has been no breach; but it remains a theoretical possibility that the Commission could open proceedings for infringement against the United Kingdom.
The law as to State aid
Articles 107 and 108 TFEU provide, so far as relevant, as follows:
“ Article 107
(1) Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.
…
Article 108
…
(2) If, after giving notice to the parties concerned to submit their comments, the Commission finds that aid granted by a State or through State resources is not compatible with the internal market having regard to Article 107, or that such aid is being misused, it shall decide that the State concerned shall abolish or alter such aid within a period of time to be determined by the Commission. If the State concerned does not comply with this decision within the...
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