The Durham Company Limited v Durham County Council

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.

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:

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.

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.

Articles 107 and 108 TFEU provide, so far as relevant, as follows:

It is common ground that, in order for a case to fall within the scope of Article 107(1), four conditions must be satisfied: (1) there must be aid, in the sense of an economic advantage, granted by the State or through State resources; (2) the measure must favour certain undertakings over others in a comparable legal and factual situation (a “selective advantage” must be conferred); (3) that advantage must not be justified by the nature or general scheme (or structure) of the system; and (4) it must be liable to distort competition and to affect trade between Member States.

So far as the second of these conditions is concerned, Bacon, European Union Law of State Aid (3^rd ed, 2017) states (footnotes omitted except for footnote 493):

In Credit Suisse (Securities) Ltd v Commissioners for Her Majesty’s Revenue and Customers [2019] EWHC 1922 (Ch), [2019] 5 CMLR 17 Falk J reviewed two decisions of the Grand Chamber of the Court of Justice of the European Union and concluded at [30]:

It is also common ground that the final sentence of Article 108(3) is directly effective under EU law and generates an obligation on a Member State which may be relied upon by a private party before the courts of that Member State.

In Joined Cases C-6/90 and C-9/90 Francovich v Italian Republic [1991] ECR I-5357 the CJEU held that in certain circumstances Member States were liable to compensate persons who had suffered damage as a result of failures by States to comply with EU law. The conditions for State liability were refined in Joined Cases C-46/93 and C-48/93 Brasserie du Pêcheur SA v Federal Republic of Germany [1996] ECR I-1029 at [51]:

In R (on the application of Negassi) v Secretary of State for the Home Department[2013] EWCA Civ 151, [2013] 2 CMLR 45 Maurice Kay LJ summarised at [14] the guidance as to the assessment of whether a breach is sufficiently serious given by Lord Clyde in R v Secretary of State for Transport, ex parte Factortame Ltd (No5) [2000] 1 AC 524 at 554-556:

TDC’s claim as originally pleaded in Particulars of Claim dated 11 March 2020 was helpfully summarised by the judge at [12] as follows:

In its Defence served on 15 May 2020 the Council averred that a breach of Article 108(3) was not actionable per se, but only if the conditions for State liability were met, including that the breach was sufficiently serious; and pointed out that TDC had neither alleged that the breach was sufficiently serious nor pleaded any facts which could be relied upon in support of such an allegation. On 20 May 2020 the Council issued an application to strike out TDC’s claim alternatively for summary judgment dismissing it.

In its Reply served on 10 November 2020 TDC averred that breach of Article 108(3) was actionable as breach of statutory duty and in the alternative pleaded that the breach was sufficiently serious. On 16 November 2020 TDC issued an application for permission to amend its Particulars of Claim to introduce essentially the same allegations which came before the judge at the same time as the Council’s application for summary judgment on 18 November 2020. The proposed amendments include the insertion of new paragraph 28C, which pleads TDC’s case on sufficient seriousness in the following terms:

It is common ground that:

The Council is an emanation of the State for the purposes of Article 107(1).

The Council acted as an “undertaking” in its provision of commercial waste collection services.

The arrangements by which the Council provided commercial waste collection services were put into effect without prior compliance with the procedure in Article 108(3) if the Council was required to comply with that procedure.

Therefore, if those arrangements involved the grant of State aid within Article 107(1), the Council was in breach of the requirement imposed by the final sentence of Article 108(3).

The judge rejected TDC’s argument that breach of Article 108(3) is actionable as breach of statutory duty, and there is no appeal by TDC against that part of his judgment.

There is no dispute as to the test for summary judgment. The judge cited the well-known summary of the applicable principles by Lewison J in Easyair Ltd v Opal Telecom Ltd[2009] EWHC 339 (Ch) at [15] approved by this Court in AC Ward & Sons Ltd v Catlin (Five) Ltd[2009] EWCA Civ 1098, [2010] Lloyd’s Rep IR 301 at [24]. In short, summary judgment can only be granted where the claim has no real prospect of success bearing in mind not only the evidence on the summary judgment application but also the evidence that can reasonably be expected to be available at trial. Nor is there any dispute that the judge was correct to apply the same test to the allowability of TDC’s amendment to the Particulars of Claim.

Before the judge the Council contended that: (i) TDC had no real prospect of establishing that the matters complained of involved the grant of State aid contrary to Article 107(1) because the selectivity condition was not satisfied; alternatively (ii) TDC had no real prospect of success in its claim for damages because the breach of Article 108(3) complained of was not sufficiently serious; and in any event (iii) TDC had no real prospect of success in its claims for injunctive and declaratory relief.

TDC raised a procedural objection to the Council’s first contention on the ground that the Council had not given at least 14 days’ notice of this contention as required by CPR rule 24.4(3)(b) read together with Practice Direction 24 paragraph 2(3), but had raised it for the first time in its skeleton argument exchanged on 16 November 2020. The Council’s responses to this objection were that (i) it was only on 10 November 2020 that TDC had properly pleaded its case, and (ii) in any event its argument on selectivity was one of law which was properly raised in its skeleton argument. The judge could have ruled upon this dispute at an early stage of the hearing, but instead he reserved his decision until he delivered judgment on the substantive applications. Accordingly, he heard argument on the Council’s first contention.

In his judgment the judge held that the Council was indeed in breach of the requirement to give 14 days’ notice of the contention. He went on at [24(4)]:

He added at [25]:

In the light of his decision on TDC’s procedural objection to the Council’s first contention, the judge considered the Council’s second contention on the assumption that the arrangements complained of by TDC fell within Article 107(1), and therefore TDC would establish the breach of Article 108(3) which it alleged. Having noted at [55] counsel for TDC’s submission that great caution was needed given that the application was being heard before disclosure had been given and thus TDC’s ability to advance a case on seriousness of the breach was limited by its lack of access to the internal workings and deliberations of the Council, he proceeded to consider the eight Negassi factors.

So far as factor (1) was concerned, the judge held at [56] that the fact that the State aid rules were important and Member States had no discretion with respect to compliance was “a significant factor but it is not necessarily determinative of the question of seriousness”.

The judge considered factors (2) to (5) together. He began by observing:

The judge then turned to consider the strength of the Council’s argument that there was no breach of Article 107(1) because the selectivity condition was not satisfied. He explained his reason for undertaking this exercise even though he was not going to determine the point at [59]:

Having cited from Bacon and Credit Suisse, the judge recorded at [62]:

It is not necessary for the purposes of the appeal to refer to the first decision relied upon by the Council since it did not concern waste collection services. The second decision was Warren J’s judgment in R (TDC) v HMRC cited above. As the judge recorded at [64]:

Having considered Warren J’s judgment in some detail, the judge reasoned as follows:

As for the remaining factors, the judge’s assessment at [69] was as follows:

The judge concluded:

The judge held at [75] that, if the claim for damages was dismissed, its claim for a declaration would be “of no more than historic interest” since the EU rules on State aid would cease to apply to the UK on 31 December 2020 and the Government had announced its intention to follow the WTO subsidy rules instead. Given that a declaration would be “academic”, there was no real prospect that it would be granted.

TDC appeals on three grounds. Ground 1 is that the judge erred in law in finding that TDC had no real prospect of showing that any breach of Article 108(3) that may be established in this case could be sufficiently serious so as to sound in damages. Ground 2 is that the judge’s reliance upon the Council’s selectivity argument as part of his reasoning on sufficient seriousness was procedurally unfair. Ground 3 is that the judge erred in finding that declaratory relief as to the past position under Article 107(1) would serve no useful purpose.

Logically ground 2 comes first. TDC’s argument is simple. The judge ruled that it would be substantially unfair to TDC for the Council to be permitted to rely upon its argument with respect to the selectivity condition as a ground for summary judgment given the Council’s failure to give the required 14 days’ notice of the point. There is no challenge to that conclusion by the Council by way of a respondent’s notice. TDC submits that it must follow that it was unfair for the judge to permit the Council to rely upon the very same argument as part of its case with respect to sufficient seriousness. In other words, TDC says that the judge was inconsistent in his treatment of this question.

Although this appears at first blush to be a powerful argument, I do not accept it. In my judgment there is no inconsistency in the two positions adopted by the judge. As I have explained, the essence of the judge’s procedural ruling was that it would be unfair for the Council to be permitted to rely, without having given due notice, upon its argument that the selectivity condition was not satisfied as a ground for contending that TDC had no real prospect of establishing that there was a breach of Article 107(1), and hence of Article 108(3), and therefore the entire claim should be dismissed for that reason. When he came to consider the Council’s argument that TDC had no real prospect of success in its claim for damages, the judge rightly assumed that TDC would establish the breach of Article 108(3) which it alleged. The question then was whether TDC had a real prospect of success in showing that the breach was sufficiently serious to justify an award of Francovich damages. In that context it was perfectly legitimate for him, for the reason he explained at [59], to consider the apparent strength or weakness of the Council’s argument without determining it. That is particularly so since the Council primarily relied in support of its argument upon Warren J’s judgment in the VAT case. Counsel for TDC accepted that he was not taken by surprise by the reliance upon Warren J’s judgment, which not only was well known to TDC and formed a key part of the background to the present case, but also was referred to in TDC’s own evidence on the summary judgment application. Thus I consider that there was no unfairness to TDC in the judge proceeding in the way that he did.

TDC contends that the judge made two errors of law when considering the question whether the Council’s breach of Article 108(3), assuming that the breach was established, was sufficiently serious to attract an award of Francovich damages.

Before turning to consider the alleged errors of law, it is worth putting them in context. The judge noted at [72] that no case had been brought to his attention where Francovich damages had been awarded for breach of the State aid rules. Before this Court counsel for TDC accepted that, so far as he was aware, there had been no case in any of the 28 countries which are or have been EU Member States since Francovich was decided over 30 years ago in which such a claim had succeeded. It is manifest that the reason for this complete absence of precedent is that, as the judge observed, although the State aid rules are clear and easy to state, their application can be far from plain and obvious. Thus it will be a rare case in which a breach is sufficiently serious to merit an award of Francovich damages.

First, TDC contends that the judge erred in holding that the importance of the State aid rules was not determinative of the question of seriousness. In oral argument counsel for TDC went so far as to submit that the issue was a black-or-white one: a breach was inevitably sufficiently serious. He cited no authority which supports this submission. The best he was able to do was to rely upon the CJEU’s statement in Case C-5/94R v Ministry of Agriculture, Fisheries and Food ex parte Hedley Lomas (Ireland) Ltd[1997] QB 139 at [28], in the context of a refusal to issue an export licence in breach of Article 34 of the EEC Treaty that, “where … the member state … was not called on to make any legislative choices and had only considerably reduced, or even no, discretion, the mere infringement of Community law may be sufficient to establish a sufficiently serious breach”. As the judge noted, however, the Court said “may be”, not “is”. In my judgment TDC’s contention is both contrary to authority, namely Factortame and Negassi, and plainly wrong for the reasons I have given in the preceding paragraph.

Secondly, TDC contends that the judge erred in concluding that the breach could not be sufficiently serious because the Council had raised some reasonable arguments in relation to the application of the selectivity condition. I would observe that this contention involves a mischaracterisation of the judge’s reasoning: he did not hold that the breach could not be sufficiently serious merely because the Council had raised some reasonable arguments in relation to the selectivity condition. Thus he also took into account, in particular, his assessment that TDC had no real prospect of establishing that the Council had intentionally or recklessly broken the law and the absence of any support for TDC’s complaint from any Community institution. I accept, however, that this was a significant element in the judge’s overall assessment. TDC submits that deliberate action causing damage to others is sufficiently serious if there was reasonable doubt as to the lawfulness of that action. Again counsel for TDC cited no authority which supports this submission. In my judgment it is again both contrary to authority, namely Factortame and Negassi, and plainly wrong.

In oral argument counsel for TDC advanced two further submissions in support of ground 1 which were not foreshadowed in TDC’s skeleton argument for the appeal. First, although he did not maintain TDC’s allegation that the Council had deliberately broken the rules on State aid, he repeated the submission rejected by the judge that the Council had acted without regard to those rules, not caring whether its conduct infringed them i.e. recklessly. I agree with the judge, however, that nothing pleaded by TDC in paragraph 28C of its draft Amended Particulars of Claim raises a real prospect of such a finding being made. As the judge rightly held, this failure on the part of TDC cannot be excused by the absence of disclosure. The burden lies on TDC to prove that the Council was reckless, not on the Council to disprove it. The Council would only be required to give disclosure on this issue if TDC pleaded a case of recklessness with a real prospect of success; but TDC has not done so. It follows that, as the judge rightly concluded, the seriousness of the Council’s assumed breach of Article 108(3) must be assessed on the footing that it was unintentional. This is hardly surprising: the Council would not be the first State emanation to have made an error of judgment as to the applicability of the State aid rules. Furthermore, it is a matter of record that the Council already had the benefit of Warren J’s decision in the VAT case when TDC first raised its complaint in the letter of 31 July 2017 pleaded in paragraph 28C.

Secondly, counsel for TDC repeated the submission rejected by the judge that Warren J’s judgment did not support the Council’s argument on selectivity. He argued that it was obvious that the selectivity condition was satisfied because the Council supplied its commercial waste collection services as an “undertaking” in competition with private sector operators such as TDC.

Warren J’s analysis was helpfully summarised, and endorsed, by Nugee J when refusing permission to appeal as follows:

Given the special legal regime under which the Council operates, and the resulting constraints on its provision of waste collection services, I agree with the judge that it is well arguable that the Council is not in a “comparable legal and factual situation” to private sector competitors such as TDC. Counsel for TDC relied on the fact that section 45(1)(b) of the EPA empowered a local authority such as the Council to contract out the provision of commercial waste collection services to a private sector contractor, but I am not persuaded that that necessarily detracts from Warren J’s analysis. Nor am I persuaded that the different context in the present case necessarily renders that analysis inapplicable.

Finally, I would add that the judge’s assessment as to whether the assumed breach is sufficiently serious has subsequently received support from the preliminary views expressed by DG Comp that there has in fact been no breach. This confirms that the present case is a long way from the kind of egregious, wilful, deliberate or at least manifest breach of EU law that is required for an award of Francovich damages

TDC contends that the judge was wrong to hold that it had no real prospect of obtaining a declaration that the Council had acted in breach of the State aid rules if the claim to damages was summarily dismissed. TDC argues that a declaration would still serve a useful purpose since it would be informative for the future. In my judgment, however, the judge was clearly correct to say that a declaration would be academic given that the UK was no longer going to be bound by EU law on this subject. Again, his assessment has subsequently received support, in this case from (i) the disapplication of the EU State aid rules by the State Aid (Revocations and Amendments) (EU Exit) Regulations 2020 (SI 2020/147) and (ii) the Subsidy Control Bill which is currently before Parliament. The Bill applies a different legal regime which is intended to comply with the WTO rules and with the UK’s obligations under the Trade and Cooperation Agreement with the EU, but is not intended to comply with EU law. Counsel for TDC nevertheless argued that a declaration as to the position under EU law could cast light on the position under the Bill, assuming it becomes law. In my view this is a hopeless argument. It would plainly do no such thing.

For the reasons given above I would dismiss this appeal.

I agree with Lord Justice Arnold about Grounds 2 and 3. I have read the judgment of Lord Justice Coulson about Ground 2. I initially shared the concerns which he sets out, but, like him, I have been persuaded that the judge’s treatment of the selectivity issue was sound. If the Council had acted as it did because it considered that its activity did not involve the grant of State aid contrary to Article 107(1) on the ground that the selectivity condition was not satisfied, the fact that this position is arguable is relevant in deciding how serious its assumed breach of the State aid rules was. I believe that there are difficulties with the way the judge approached the selectivity argument when dealing with that issue which are best dealt with under Ground 1. The judge did not expressly deal with the fact that because he was assuming that there had been a breach of State aid, he was also assuming that, though arguable, the Council’s position was wrong. In assessing seriousness, I consider that it would be necessary to determine the respect or respects in which the Council was wrong, and how they came to make, and persist in, that error of law. There was no material before the judge on any of those questions and that is fundamentally why I am concerned about the summary disposal of this case.

I also agree with Lord Justices Arnold and Coulson that on the present state of the evidence the prospects of TDC establishing that the assumed breach was sufficiently serious to result in an award of damages do not appear to be strong. However, with regret, I have come to the conclusion that I do not agree that the judge was right to enter judgment in favour of the Council. Given the clear and cogent views to the contrary of Lord Justice Arnold and Lord Justice Coulson, I shall try and explain briefly why this is.

In my judgment it is important to see how the issue of seriousness developed in the evidence which was before the judge. Lord Justice Arnold has described the history of the way in which TDC addressed the issue in the pleadings. This resulted in the application, which was before the judge, to amend its Particulars of Claim set out at paragraph 22 above. It was that amended case which required evaluation, and it said:-

The Council did not deal with the seriousness of an assumed breach in its Defence or evidence. The Defence says this:-

The Council provided a witness statement in relation to its application for an order striking out the claim, or giving summary judgment in its favour. It is the statement of a solicitor, Mr. Branton, who does not explain why the Council breached the State aid rules in the way which was assumed at the hearing. He does not explain why the Council did not inform the Commission of the (assumed) grant of State aid under Article 108(3) of the TFEU. This statement was made in May 2020 and long before the service of the Reply and the application to amend the Particulars of Claim to raise an allegation as to seriousness. It is not a matter of criticism of the Council’s presentation of its case to point out that it does not offer any justification of the assumed breach, because of the procedural history. It is however the case that the Council has not explained why it broke the law. Its position remains that it did not do so. The allegation that any breach which may be proved was not sufficiently serious to justify an award of damages is an alternative case, put forward as a second line of defence. It has been argued as a pure point of law, in the absence of any evidence on the point.

There is, in my mind, a difficulty in assessing the seriousness of an assumed breach of the law which no-one has identified with any precision. The proposed amendment to the Particulars of Claim identifies communications to the Council which, it is said, put the Council on notice that it was acting unlawfully and says that the breach became “flagrant” because it continued after that happened. For the purposes of this exercise, it is to be assumed that the communications were right, and the Council was wrong to ignore them and that it should then have secured the provision of information by the United Kingdom to the Commission about the grant of State aid which was involved. What are the factors which give rise to that assumed conclusion? It is very hard to say, since it actually arises from a procedural failure by the Council to give 14 days’ notice of its application based on the selectivity principle and is quite likely to be actually wrong.

Lord Justice Arnold sets out the multifactorial test explained by Lord Justice Maurice Kay in R (oao Negassi) and another v. SSHD [2013] EWCA Civ 151 at [14] in paragraph 19 above. Of the eight factors identified the fifth is:-

The last few lines of paragraph 14 of the judgment of Lord Justice Maurice Kay’s judgment are worth setting out again, in which he quotes from Lord Clyde in R. v. Secretary of State for Transport Ex. P. Factortame Ltd. (No. 5) [1999] 3 CMLR 597; [2000] 1 AC 424:-

I regard the application of a test which is “a matter of fact and circumstance” as unsatisfactory where, as here, one of the relevant factors is entirely within the knowledge of a party to the proceedings who has provided no evidence and given no disclosure about it. The judge’s conclusion as to the selectivity argument is only relevant to the fifth Negassi factor if that was in fact why the Council chose to ignore the materials referred to in the amended Particulars of Claim. He assumed that they had an arguable case on that issue and that this was relevant to their conduct. He may well have been right in that assumption, but he might have been wrong. It might be observed that if the selectivity principle was in fact central to its decision making, it is surprising that it arose so late in the day in its written case.

I do not agree that disclosure of documents would be a “fishing expedition”. It is extremely likely that there is documentary evidence in the possession of the Council which is relevant to the fifth Negassi factor, and there is nothing speculative about asking to see any of it which satisfies the test for disclosure, or expecting to see supportive documentation produced in evidence. Neither do I consider that the current pleadings are insufficient to trigger that exercise. There is an (assumed) act of unlawfulness sustained over a number of years causing significant financial loss to TDC. That triggers the application of the Negassi test, which requires the court to be fully informed about all relevant factors. This is especially so if the court is invited to conclude that summary judgment should be granted to one party or the other because there is only one realistically possible outcome.

For these reasons I would allow the appeal and dismiss the application for summary judgment.

Although I have reached the conclusion I have, I fully acknowledge the likelihood that these further procedures would result in the failure of the claim. I also accept the force of the observation that we were shown no case where damages were awarded against a member state for breach of the State aid rules. I would not bar the Council from seeking a determination of these issues in advance of the trial if it provides evidence on which they can safely and fairly be determined.

I agree that, for the reasons set out by my Lord, Lord Justice Arnold, this appeal should be dismissed. That said, I should identify the two reservations which I had at the outset of the appeal, and the reasons which have led me to conclude that, on a proper analysis, they do not undermine the judge’s judgment.

At [23]-[24], the judge upheld TDC’s submission that the selectivity argument was not open to the Council on procedural grounds. If the Council had intended to seek summary judgment on the basis of the argument that the selectivity criterion was not met, the judge said that it ought to have given at least 14 days’ notice of the point. They failed to do so. At [24(4)], the judge found that, not only did the selectivity argument go to “the fundamental basis of the claim”, but the absence of notice “is a substantial unfairness to TDC”. There is no appeal against the judge’s ruling in that respect. However, it is right to note that the position was not clear-cut, because not only had TDC been able to address the selectivity argument at the hearing, but there was also some force in the Council’s suggestion that some of the procedural problems could be traced back to TDC’s own failure to plead the ‘sufficiently serious’ argument at all.

When the judge moved on to consider whether the breach was sufficiently serious so as to give rise to State liability in damages, the selectivity argument became an important part of his reasoning: see [59]-[68]. He said at [67] that it was at least strongly arguable that “the Council…does not provide its commercial waste collections services on a commercial basis but under a specific regime for environmental protection, which is directed for the public benefit not to the economic advantage of local authorities, and as such its contractual and legal situation is not comparable to that of TDC”.

It was not entirely clear to me how the selectivity argument could be simultaneously ruled out of court on procedural grounds, but then be a part of the judge’s reasoning on the critical issue of ‘sufficiently serious breach’. The judge does not explain how or why the procedural difficulties rule out his consideration of the selectivity argument in one context but not in another.

But I have concluded that this potential inconsistency may look rather more serious than it really was. This is because the judge’s conclusion at [67] was based directly on the decision of Warren J in the VAT case between the same parties (see paragraphs 9, 35 and 49 of my Lord’s judgment above). On behalf of TDC, Mr Bowsher properly accepted during oral argument that he was not taken by surprise by the Council’s reliance on that judgment and its conclusions. He could hardly say otherwise. The selectivity argument is central to the reasoning and result in that case, so it seems to me that the judge was bound to take it into account when considering whether the Council and TDC were in comparable positions.

This brings me on to the second reservation I had. The judge’s conclusion, noted above, that the legal and contractual situations of the Council and TDC were not comparable, seemed on its face to ignore the fact that, when collecting commercial waste and charging for it, both the Council and TDC were commercial undertakings providing the same service.

The decision of Warren J in the VAT case explains why, on his analysis, their situations were not comparable. That may well be right. But for present purposes, it is unnecessary to go that far. What matters is the judge’s conclusion at [68] to the effect that, even if Warren J had been wrong, the Council’s decision to act as if their situation was not comparable with that of TDC (or any other commercial undertaking) could not possibly be regarded as egregious or blatantly wrongful. There was authority which appeared fully to support the Council’s stance. So the ‘sufficiently serious’ test had not been made out in any event.

Accordingly, I find that my nagging doubts about the judge’s judgment have been assuaged. Moreover, although I accept that it is a strong thing to strike out a claimant’s case at an early stage, it is important to take a step back and look at this claim in the round. As my Lord has noted, there has never been a successful Francovich claim in respect of State aid. Was this claim really going to be the first ever, when to win TDC would have had to distinguish the judgment of Warren J completely, and persuade a court that it was a reasonable and sensible solution for the Council’s bin lorries to ignore the commercial waste left out on the street, and leave that waste for a second fleet of bin lorries, this time operated by TDC, to pick up instead? The answer must be a resounding ‘No’.