Damages and the Competence of the Administrative Court

The award of damages is not a remedy traditionally available in judicial review. In public law proceedings, the purpose of a claim is to identify unlawfulness and bring it to an end, not to compensate those who have been affected by it.

In recent years, however, the non-financial purity of judicial review has been eroded by a number of developments. In particular, monetary compensation is now available in some cases where the source of the wrong was non-compliance with either EU law (Francovich damages) or the European Convention on Human Rights (under section 8 of the Human Rights Act 1998).

But does the Administrative Court, without any real track record in this area, have the competence to carry out an assessment of damages in a complex case?

The Damages Claim in Breyer

In the recent case of Breyer v Department for Energy and Climate Change, the Court of Appeal held that DECC had acted unlawfully by proposing to make a retrospective change to its subsidy scheme for solar energy. Although the proposal was successfully challenged before it was implemented (and therefore never took effect) it was unlawful even to have consulted on it.

Moreover, the consultation had serious implications for those in the solar energy industry. The claimants ran various businesses associated in some way with solar photovoltaics. All argued that those businesses had been affected by DECC’s proposal, as a result of which they had lost customers and contracts. The Court of Appeal agreed that, if they had, and to the extent to which they had lost the value of ‘marketable goodwill’, they were in principle entitled to be compensated for a breach of their Convention rights.

However, the assessment of damages – the total claim for which amounted to £195m spread across nineteen claimants – was left to be considered at a separate hearing.

In many public law cases where damages claims arise, assessment is not difficult. Damages for non-pecuniary loss under the Convention (e.g. for unlawful detention) are set in very broad terms. Their main purpose is to serve as a recognition that harm has been caused, without purporting to put a genuine financial value on the claimant’s loss.

Even in cases in which the loss is financial and therefore can be calculated – where the prevailing principle is to put things back to the position in which they should have been (restitutio in integrum) – the assessment is often not complex and can be agreed between the parties. R (Infinis) v Ofgem* is an example of one such case.

Breyer falls into the Infinis category of a financial claim, but its facts present a much more complicated picture. In particular, the case involves some potentially difficult issues of causation and quantum.

Specifically, the claimants are not entitled to claim loss of profits under the Convention, since future profits are not a ‘possession’ for the purposes of Article 1, Protocol 1. Hence the focus on ‘marketable goodwill’ in each business, which can be a possession for this purpose. But the assessment of goodwill in each business requires a careful trawl through the customer contracts that the companies were holding at the time at which DECC made its proposal.

Even then, causation cannot simply be assumed. To what extent did DECC’s actions cause the loss, and to what extent was it a result of the commercial reactions of the claimants?

The Transfer Application in Breyer

At some point while they were considering this complexity, the claimants’ lawyers decided that this was all going to be a bit too much for the Administrative Court. So they applied to the Commercial Court to have the case transferred there, arguing that these were essentially commercial issues, and much better suited to determination by experienced commercial judges.

Teare J in the Commercial Court (in an extempore judgment**) refused to accept the transfer. His reasoning was simple. Given the cost and disruption of a transfer, cases should stay where they are unless there is a good reason to move them. The key factor is always the subject matter of the case. A commercial claim is a dispute between businesses relating to a commercial transaction. But Breyer is not such a claim. It is a dispute between business and government about the liability of the latter under the Human Rights Act.

While there were certainly commercial aspects to the facts of the case, they neither rendered it necessary for disposal by the Commercial Court, nor unsuitable for the Administrative Court. The Administrative Court is a part of the Queen’s Bench Division, where judges frequently have to assess damages. The case is well within their competence.

Ultimately, said Teare J, this is a public law claim, and that fact does not change merely because the remedy being pursued is a financial one.

The Bigger Picture

Superficially raising a small point of procedure about the appropriate venue for a hearing, the decision on the transfer application in Breyer in fact signals something important – that damages should now be regarded, in those cases in which they are available, as an unexceptional remedy in public law proceedings.

In other words, there is nothing inherent in a financial claim, even a complex one, which renders it ‘commercial’ if it arises in a public law context. And there is nothing intrinsic to the process of assessing damages which takes it outside the institutional competence of the Administrative Court.

What this also does, in passing, is draw attention again to the inconsistent availability of damages in public law. The Law Commission added this subject to its work programme as far back as 2005. Its reason for doing so, as outlined in its paper Remedies against Public Bodies: A Scoping Report, was that –

‘The general rule is supposed to be that, on judicial review, damages are not available…[but]  a series of autonomous developments in the law [have] made that general rule less general, to the point of becoming anomalous.’ (paragraph 2.1)

The problem is not only that it makes little sense for damages to be available in EU and Human Rights Act cases but not for breaches of domestic law, but also that developments in tort law and in the ombudsman jurisdiction make an absence of damages as a general public law remedy look like a historical anomaly.

The Parliamentary and Health Service Ombudsman, for instance, regularly makes financial awards to complainants (strictly non-binding in law, but by convention always paid). Can it be right that financial compensation should be available for the consequences of maladministration (poor administrative practice falling short of unlawfulness) but not for actual breaches of the law?

When the Law Commission consulted on this in 2008, in a paper entitled Administrative Redress: Public Bodies and the Citizen, it took the view that a general right to damages should exist in public law in any case in which serious harm had been caused by an unlawful decision.

However, a range of public authorities reacted badly to the notion that they might be responsible for the consequences of their own mistakes, and the hostile reaction to the proposal effectively stopped it in its tracks. By the time the Law Commission submitted its Final Report to Parliament it was May 2010, and the government in power was one of the most hostile to judicial review in recent times. As a result, the proposal has been quietly buried, with no likelihood of resurrection in the medium term.

Nevertheless, in the light of Breyer it is worth returning to the Law Commission’s words –

‘Our provisional view is that judicial review has developed in a way that is over restrictive in relation to the award of damages to an aggrieved citizen. This can lead to significant injustice to those citizens who are adversely affected by poor decision making…

In considering reform of this area, it seems that the traditional arguments relating to lack of institutional capacity within the Administrative Court are not necessarily valid. Furthermore, it is plainly anomalous that a claimant can recover damages where a public body has breached a rule of EU law intended to confer rights on individuals but not where the breach is of a rule of purely domestic law.

For these reasons, we consider that there is a strong case for reform with regard to the availability of damages in public law.’ (Consultation, paragraphs 4.31 – 4.33)

This conclusion remains at least as true now as it was then.

It is surprising in 2016 to find some public lawyers (who might perhaps know better) still pursuing arguments about a presumed lack of competence of the Administrative Court. The Commercial Court was right to reject them.

Meanwhile, a more general right to damages in judicial review awaits its day.

* Declaration of interest – a case in which I was part of the legal team for the claimants.

** Not available from public sources, but accessible via certain subscription services such as Lawtel.