Council defeats High Court claim from waste company over alleged unlawful state aid

The High Court has thrown out a claim by a recycling company that Durham County Council priced it out of business through unlawful state aid.

In The Durham Company Ltd (t/a Max Recycle) v Durham County Council [2020] EWHC 3200 (Ch) HHJ Keyser said the claim concerned European Union state aid regulations which were due to lapse in the UK on 31 December and that if any domestic regime replaced these a new claim under that would be required.

Max Recycle, which trades as The Durham Company (TDC), sought remedies including a permanent injunction against what it called a long-term and continuing breach by the council of EU state aid rules.

TDC provides commercial waste services which give it an estimated profit margin of up to 5%.

Durham also provides commercial waste services for which - unlike household waste - it charges fees.

Its commercial waste service shares vehicles and personnel with the household operation and common accounts are kept.

TDC contended that it lost significant business from customers who switched from it to the council as commercial waste collection provider.

It said the prices offered by the council were “simply unsustainable for a private company given the costs and overheads involved in waste collection and disposal” and that Durham was able to undercut TDC because it used the same taxpayer-funded infrastructure and resources for commercial waste as for household waste.

The council argued that TDC had not pleaded, and had no real prospect of establishing, a right to recover damages.

Durham also maintained that TDC had no real prospect of establishing that the matters complained of constituted the unlawful state aid or of succeeding in its claim for declaratory and injunctive relief.

In his ruling HHJ Keyser said TDC's case was that as a matter of English law a right of action for breach of Article 108(3) was not subject to satisfaction of the state liability conditions but was a simple claim for breach of statutory duty.

He said: “That proposition is both surprising and, in my judgment, plainly wrong.

“Article 108(3) concerns obligations of the state, and the liability to which it gives rise at EU law is subject to the state liability conditions.

“No authority has been produced to suggest that, despite the limitations on liability in EU law, the English courts recognise that breach of Article 108(3) gives a cause of action for breach of statutory duty in English law free of the state liability conditions.”

The judge noted these conditions were sometimes referred to as ‘the Francovich conditions’.

HHJ Keyser concluded: “TDC had no real prospect of succeeding on [this] claim…and ought not to be permitted to advance such a claim.”

He said its case for a damages claim was “at best merely arguable but that it carries no conviction and has no realistic, as opposed to merely fanciful, prospect of success. It ought not, therefore, to be permitted to proceed.”

TDC also had “no prospect of obtaining a final mandatory injunction on the basis of its claim in these proceedings”.

This was because, the judge said: “By the time any trial took place, the EU state aid rules that such an injunction would be designed to enforce compliance with would no longer apply.

“Of course, there might be a new regime in place…but any claim for an injunction to enforce compliance with such a regime would have to be a new claim based on a different cause of action.”

There was also “no real (that is, as opposed to fanciful) prospect of obtaining declaratory relief in the absence of a damages claim,” HHJ Keyser said.

“If the only surviving claim to relief were a claim for a declaration, it would be of no more than historic interest: the declarations of breach of EU state aid rules would have no practical consequences in terms of redress of past wrongs, and they would have no prospective value where the legal framework to which they related no longer applied.”

Mark Smulian