Electricity — Supply — Investment contract — Claimant company applying to defendant secretary of state for investment contract — Defendant refusing application on basis claimant not meeting key criterion — Claimant applying for judicial review — Court granting application on ground that defendant’s decision unreasonable — Defendant appealing — Whether judge erring in law — Whether defendant’s failure to give claimant opportunity to clarify case constituting procedural fairness — Appeal allowed
The claimant company applied to the defendant secretary of state for an investment contract in respect of the conversion of a unit at its power station. Although the claimant met the criteria at the first two phases, the defendant found that the binding application did not include the necessary restatement of the key criterion that without the investment contract there was a significant risk that the electricity generation to which the contract related would not occur or would be significantly delayed. It invited clarification, to which the claimant responded. However, the defendant concluded that the claimant did not qualify for the contract because it did not meet the key criterion.
The court granted the claimant’s application for judicial review of that decision on the ground that it was one which no reasonable decision-maker could have made. In particular, the defendant had misunderstood what the claimant was saying in the first two phases of its application, had introduced a new criterion and had erred in finding that there was a difference between what the claimant was saying at the first two phases and at the binding application phase with respect to the delay which would occur in the absence of the investment contract. Therefore, the judge quashed the decision, granted a declaration that the key criterion was satisfied and remitted the application for prompt reconsideration by the defendant in the light of her judgment: see [2014] EWHC 2377 (Admin).
The defendant appealed. The questions for the Court of Appeal were: (i) whether the judge had erred in her approach in making her finding that the defendant’s decision had been unreasonable; and (ii) whether the defendant had acted unfairly in proceeding to a decision without giving the claimant an opportunity to provide further clarification of its case so that the claimant had been denied procedural fairness.
Held: The appeal was allowed.
(1) The details given in the binding application and clarification letter did not compel the conclusion that, in the absence of an investment contract, the claimant was at significant risk of being unable to obtain sufficient supplies to run the unit at full capacity. It was evident that an investment contract would be commercially advantageous to the claimant in its negotiations with its suppliers but it was not evident that the absence of such a contract would risk a delay in generation. Looking at the matter from the perspective of the decision-maker and asking whether its approach to relevant matters was a reasonable one and whether the ultimate decision was reasonably open to it on the material before it, the Court of Appeal was not persuaded by the judge’s reasoning that, in deciding that the claimant had failed to demonstrate to its satisfaction that the key criterion had been met, the defendant had reached a decision that no reasonable decision-maker could reach. In the circumstances it was not unreasonable for defendant to take the view that a satisfactory explanation had not been given as to how the alleged delays in fuel supply chain investment would prevent or delay generation. It was reasonable for the defendant to scrutinise the application rigorously for an explanation of why it was said that a delay in generation would nevertheless arise without an investment contract and to take the view that a satisfactory explanation had not been provided. Accordingly, this was not an appropriate case for interference by the court on Wednesbury grounds: Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1948] 1 KB 223 considered.
(2) The defendant, having identified the concerns with regard to the claimant’s binding application, had not acted unfairly in proceeding to a decision without giving the claimant the opportunity to provide further clarification of its case. The requirements of procedural fairness depended on context. The present case concerned a decision whether to award a new contract, not a decision to take away a licence or something else of value. Further, this was a competitive process, with a large number of applications and an obligation to treat all applicants equally; the procedure included no “minded to” stage; and it included a power but not a duty to seek clarification. The onus was on the claimant to produce a full and satisfactory explanation. If such an explanation was not forthcoming, it was neither unreasonable nor unfair for the defendant to conclude that there should be no further bite of the cherry. It had been made clear that the question whether the key criterion was met would be reassessed at the binding application stage. It was therefore incumbent on the claimant to put forward a case at that stage to satisfy the defendant on the point. It had failed to do so in the binding application itself but had been given the opportunity to submit a clarification, with a specific warning of the need for a clear explanation in relation to the key criterion. Even with that clarification, however, the case advanced was not sufficient to demonstrate to the defendant’s satisfaction that the key criterion was met. Fairness did not require the defendant to give the claimant a yet further opportunity to make good its case. The entire procedure was directed towards the obtaining of sufficient relevant information to determine whether the various criteria were met. No further steps were reasonably required: Secretary of State for Education and Science v Tameside Metropolitan Borough Council [1977] AC 1014 distinguished.
Tim Ward QC, Duncan Sinclair and Daisy Mackersie (instructed by Herbert Smith Freehills LLP) for the claimant; Martin Chamberlain QC and Oliver Jones (instructed by the Treasury Solicitor) appeared for the defendant.
Eileen O’Grady, barrister
