This is an important interlocutory judgment, which provides guidance on: (a) the legal test the Court will apply when determining whether a measure is consistent with the Private Investor Test (the “PIT”) in judicial review proceedings; and (b) what evidence the Court will allow to be admitted in order to challenge a public body’s contention that it has acted consistently with the PIT.
The case arises out of a dispute between the shareholders in Coventry City Football Club (“CCFC”) and Coventry City Council (“the Council”), relating to financial arrangements entered into between the Council and the operating company (“ACL”) that leases CCFC’s stadium (“the Arena”) from the Council.
At the time the Arena was developed, ACL was a 50:50 joint venture between the Council and the (then) owners of CCFC. In order to finance the development of the Arena a £22m loan was obtained from Yorkshire Bank (“YB”). ACL’s shareholders were later unable to service their share of the loan, which led them to sell their 50% stake in ACL to the Council. The Claimant subsequently acquired CCFC.
In 2012, the Claimant wished to effect a transaction whereby it would assume responsibility for ACL’s debts in return for receiving a 50% shareholding in ACL, which would entitle it to a direct share in match day revenues. A transaction on these terms was negotiated between the Claimant and the Council. The discussions progressed to the term sheet stage but ultimately were not concluded.
Subsequently, the Council granted ACL a £14.4m loan, with a 42 year term, at a reduced interest rate. The loan was used by ACL to repay its remaining debt to YB.
The Claimant brought judicial review proceedings against the Council’s decision to grant the loan to ACL. Amongst other things, the Claimant alleged that the loan amounted to a grant of unlawful State aid contrary to Art. 108(3) TFEU. In particular, the Claimant alleged that the loan was not consistent with the PIT because of: (i) the degree of risk involved in granting the loan, (ii) the low (allegedly non-market) rate of interest, (iii) the inadequacy of the security granted, and (iv) the term of capital repayment that was agreed.
The case came before Hickinbottom J as an application for specific disclosure and permission to rely upon expert evidence in support of the State aid challenge.
The Claimant had obtained a 45 page report on the terms of the loan from a chartered accountant who was described as “an expert valuer in the business context, including expertise in the valuation of loans”. The report was described by the Judge as setting out a “forensic” analysis as to why the terms of the loan were not consistent with the PIT: §41.
Hickinbottom J held that the expert evidence was not “relevant – and [is] certainly not necessary – for the fair and just determination of the issues with which the court has to grapple.” (§44).
The Judge based this conclusion on his analysis as to the nature of the test, and standard of review, which the Court is required to apply in judicial review proceedings when it is alleged that a measure constitutes unlawful State aid.
The Judge held that the role of the Court in applying State aid law is confined to conducting a “review” of the public body’s decision: §42. While the applicable standard review is “more rigorous” than ordinary Wednesbury irrationality the Judge emphasised that in his view: “it is not for the Court to impose its judgment as to whether a particular private investor would or would not have entered into this transaction”: §42.
The Court would therefore not enter into determining a conflict between competing experts as to whether or not a particular investment was or was not consistent with the PIT: §42.
The only reference to any external material by Hickinbottom J in support of his reasoning is a citation to §27 of the Commission’s 1993 communication regarding undertakings in the manufacturing sector (93/C307/03), which states (in relevant part):
“In turn, the Commission realises that [the] analysis of risk requires public undertakings…to exercise entrepreneurial skills, which by the very nature of the problem implies a wide margin of judgment on the part of the investor. Within that wide margin the exercise of judgment by the investor cannot be regarded as involving State aid.”
Comment
Hickinbottom J’s approach to the analysis of whether a measure is consistent with the PIT, and in particular the applicable standard of review, will obviously be welcomed by public bodies and those advising them. His approach to the admissibility of expert evidence is also of great practical importance.
here is the text of the judgment: –
1. MR JUSTICE HICKINBOTTOM:
2. This claim concerns Coventry City Football Club (“the Club”).
3. From 2005 to 2013, the Club’s home ground was the Ricoh Arena, Coventry. The Defendant (“the Council”) owns the freehold of the ground. However, it leased the ground to the First Interested Party (“ACL”), which, at the time of the development of the ground, was jointly owned by the Council (as to 50 per cent) and the owners of the Club (as to the other 50 per cent). That meant that the Club would receive half of the match-day revenues. However, the development of the Arena was facilitated by a £22m loan from the Yorkshire Bank (“the Bank”); and the financial pressures of servicing that loan, together with less than hoped for success on the field, resulted in the owners of the Club selling their share in ACL to the Second Interested Party (“AEHC”), but with a buy-back option subject to the consent of the Council.
4. The Claimants now own the club. In early 2008, the SISU Group of Companies, of which the Second Claimant is one, acquired the Club by purchasing the Third Claimant. The First Claimant was the corporate vehicle through which the purchase was made.
5. By 2012, it became clear that neither the Club nor ACL were financially viable in the long-term, because of the loan repayments and the other financial arrangements then in place. The proposal of the SISU Group was that it would buy the ACL debt at a discounted price to reflect the financial condition of the Club and ACL, and it would then write-off the debt leaving ACL debt‑free. In exchange, the Council would consent to the Club buying back AEHC’s 50 per cent interest in ACL, to give the Club a direct financial interest in match-day revenues. In June 2012, the SISU Group entered into an indicative term sheet with the Trustees of AEHC setting out terms of a proposed agreement under which they would buy AEHC’s interest in ACL. Separate heads of agreement were also signed by the SISU Group and the Council as to the proposed arrangements as between them.
6. However, those arrangements were never completed. Instead, the Council negotiated with the Yorkshire Bank for purchase of the debt;, and as a result of a full Council decision on 15 January 2013, the Council agreed to loan £14.4m to ACL on a 42‑month term with a reduced interest rate, to enable ACL to pay off its bank loan, which it did. For that meeting, Council members were provided with a report prepared by one of the Council’s officers, the Assistant Director for Finance, Mr Barry Hastie. Mr Hastie has also prepared a statement for the purposes of these proceedings, dated 31 January 2014, in which he returns to the justification for his recommendation to make the loan on the terms I have described.
7. In this claim, the Claimants challenge that decision of the Council to lend ACL that money. They do so on three grounds. First, they submit that, given the risk involved, the low rate of interest, the poor security and the capital re-payment period, a private investor in the shoes of the Council would not have entered into the transaction. Conse-quently, the transaction was state aid not notified to the EU Commission in advance (as required by article 108(3) of the Treaty on the Functioning of the EU), and it was thus unlawful as contrary to EU law. They also say that as a matter of domestic law, the loan was unlawful as being (i) for an improper purpose (namely gaining control of the Club and forcing a sale to a preferred third party) and (ii) irrational. The Council opposes the claim, contending that the loan was a transaction that a private investor in the Council’s position would have made; and it was for a proper purpose and was not irrational.
8. Permission to proceed was refused on the papers by Males J on 31 July 2013. On 1 October 2013, Silber J refused an application by the Claimants for disclosure prior to the renewed application. On 29 November 2013, Thirlwall J granted permission. The substantive application has been set down before me in Birmingham on 10 June 2014, with a time estimate for the hearing of submissions of three days.
9. There is now before me an application issued by the Claimants on 24 April 2014 for specific disclosure of docu-ments in the Council’s control, and also for an order permitting them to adduce further factual evidence and expert evi-dence.
10. With regard to disclosure, the principles are well-settled and uncontroversial. They have to be viewed against the following: first, the precise facts in a judicial review are usually irrelevant, the broad facts merely providing the background as to how the relevant issue of law arises; and second, the law imposes a high duty upon both the claimants and the defendants in a judicial review to make full and frank disclosure in applying for, and in responding to, such a claim.
11. Consequently, standard disclosure does not apply in judicial review (CPR 54 PD paragraph 12.1). Disclosure is dealt with more flexibly, with the court only requiring disclosure, if at all, in accordance with the needs of the particular case and only insofar as it is necessary to resolve the determinative issues in the case fairly and justly (see, e.g., Tweed v Parades Commission of Northern Ireland [2006] UKHL 53 at [3] per Lord Bingham, and at [32] per Lord Carswell). The determinative issues in a judicial review are, of course, usually narrow. In particular, disclosure is not granted to a claimant on the basis that “something might turn up” (Tweed at [56] per Lord Brown). Disclosure will not usually be ordered unless there is some material which suggests that the written evidence of the defendant is in some way inaccurate, misleading or incomplete in a material respect; in other words, if the defendant has not properly complied with its high duty of disclosure. One reason for this constraint is that the process of disclosure in judicial review proceedings “can be costly, time‑consuming, oppressive and unnecessary” (Tweed at [2], per Lord Bingham).
12. I pause there merely to note at this stage that, in support of their applications today, the Claimants have lodged bundles comprising approximately 2,000 pages, excluding the authorities. Mr Goudie QC, for the Council, submits that the Claimants have throughout this claim adopted an entirely disproportionate approach. He has given some examples of the documents which have previously been submitted by the Claimants in that regard. He submits that the claimants have failed to appreciate the true position with regard to disclosure in a judicial review, and, in essence, have a fundamental lack of appreciation with regarded to the nature of judicial review proceedings. That, again, is something to which I shall return.
13. Although disputed by the Claimants, it is submitted by Mr Goudie that, if these applications were to be allowed, the June hearing date would inevitably be lost. In addition to the burdens of the specific disclosure sought, which would require widespread enquiries to be made (for example, of the 50‑plus councillors who made the challenged de-cision, as to their own personal documents in relation to that decision), the statement of Ms Joy Seppala upon which the Claimants now seek to rely comprises 100 pages, 350 paragraphs and over 1,000 pages of exhibits which will require a response, as would the expert valuation evidence of Mr James Palmer upon which it is now sought to rely, although that is only about 50 pages. Indeed, the Claimants through Mr Thompson QC accept, rightly, that, if this new factual and expert evidence is admitted, the Council should be given an opportunity to respond to it. A word about why these ap-plications are late is therefore appropriate.
14. In addition to this claim, a separate claim was issued by AEHC against ACL for the recovery of a debt allegedly due pursuant to costs indemnity provisions contained in the indicative term agreement. That claim prompted a sub-stantial counterclaim. Those proceedings were heard by Leggatt J on 1 to 3 April 2014, when he dismissed both claim and the counterclaim. Mr Thompson contends now that, during the course of those proceedings, there was consider-able disclosure given by AEHC of documents that must also be in the hands of the Council which are, he says, highly relevant to the issues in the judicial review. They should have been disclosed in this claim, and should now be dis-closed in it. Most of the documents, or at least some of them, are now in the public domain as a result of those other proceedings; but, in so far as they are not, a request by the Claimants of AEHC for their consent for the documents to be used in this claim has met with refusal.
15. The relevant documents were disclosed in those other proceedings, as I understand it, in late January or early February of this year; and AEHC refused their consent to use the documents in this claim within about three days of being asked for it. A request for specific disclosure in the judicial review was made on 14 April, about a fortnight after the proceedings before Leggatt J had been concluded. The Council responded on 25 April. In that letter, the Council said that “full and frank disclosure of those documents which it considered to be reasonably required for the court to arrive at an accurate decision” had been made; although that letter also said that the Council would “carry out a further search for documents that we consider ought to be disclosed,” and that that search “may disclose further documents relating to [the categories requested by the claimants] if we consider that any such documents ought to be disclosed.”
16. Indeed, on 7 May 2014, 600 pages of further disclosure was made by the Council. On 9 May, the Council’s Assistant Director for Legal and Democratic Services, Ms Christine Forde, made a statement confirming that “full” dis-closure had now been made in the following terms (at paragraph 23 of her statement):
“23. It is the Defendant’s position that the further disclosure, taken with that already provided, comprises all that is relevant and reasonably obtainable bearing in mind the ambit of the challenge, the nature of the obligation of disclosure in judicial review proceedings and the importance of responding proportionately in fulfilment of that. The [Council] is also mindful of its continued duty of candour.”
In paragraphs 24 and following of her statement, Ms Forde sets out the searches for documents that have in fact been undertaken by and on behalf of the Council.
17. The categories of document for which disclosure is now sought are set out in the proposed draft order in six categories. Category 1 comprises documents “relating directly to the [Council’s] decision of 15 January 2013” and Category 2 comprises documents “relating to the negotiations between [the Council, ACL] and the Yorkshire Bank leading up to the decision”. After the recent disclosure, the request in those broad categories is now much restricted: in his oral submissions today, as I understand them, Mr Thompson accepted that the documents in category 1 have now been adequately disclosed, but there were some subcategories within category 2 that he pursued.
18. First, there are the documents that are in the hands of the Leader and Deputy Leader of the Council, Councillors Mutton and Duggins, who were (the Claimants assert) actively involved in the negotiations with the Bank and who (it is suggested) “were overtly hostile to the SISU Group and wished to drive them out of the Club”. However, leaving aside the question of whether either of these councillors did in fact play any part in the negotiations with the Bank – an asser-tion which Mr Goudie denied – in my view, any documents in the personal hands of the Leader and Deputy Leader of the Council are not disclosable for two reasons.
19. First, as Mr Goudie submitted, they are not in the possession or control of the Council, because they are the personal documents of the councillors; and consequently they are not within the reach of any disclosure obligation so far as the Council is concerned.
20. Second, it is trite law that any decision of a council is made collectively and in effect corporately. The views of a particular councillor are therefore not usually relevant; and, indeed, enquiries into what individual views might have been held raise potentially sensitive constitutional issues. The courts are rightly cautious about undue intervention by the courts into the political decision-making process, which might be seen as fettering that proper democratic process (see the illuminating analysis of Cranston J recently in R (Bishop’s Stortford Civic Federation) v East Hertfordshire District Council [2014] EWHC 348 (Admin). Thus, taking statements from and cross‑examining a councillor about such matters are generally frowned upon in this court. The documents sought are also legally irrelevant to the issues in this case, because, although the Leader and Deputy Leader of the largest party in the Council no doubt have significant influence, the decision was made by 51 members of the full Council on the basis of the information before it; and not by way of decision by only two. As I have indicated, normally this court does not look at the thought processes of individual members.
21. Even if the Claimants are right and the Labour leadership of the Council were hostile to them, that is not a foundation for a submission that they have or may have acted improperly such as to trigger disclosure obligations.
22. For those reasons, that subcategory of document is not disclosable; and I refuse the application for disclosure in respect of it.
23. The second subcategory comprises the notes taken by other members of the Council at the 15 January 2013 meeting. However, those documents fall to the same two objections that apply to the first subcategory: those notes, being personal documents, also fall outside the control of the Council, and in any event they would disclose members’ own views on the policy issue. Although it seems to me, at least with the benefit of hindsight, it is unfortunate that no record of that meeting was apparently kept, the notes now sought are not a means whereby any possible deficiency can properly be plugged.
24. The third subcategory comprises minutes and other records of meetings of the Council’s Cabinet at which the negotiations with the Bank and/or the SISU Group and/or the Club were discussed. I can deal with this shortly. As I understand it, the relevant minutes and records of such meetings have been disclosed. There were other briefing meet-ings of less formality between officers and members of the Council which were not minuted – and thus there are no minutes of those to be disclosed. During the course of those briefing sessions, there were various presentations in the form of slides and so on. Those, as I understand it, have been disclosed. Therefore, in relation to this subcategory, disclosure has been properly made.
25. The next category (Category 3) comprises “documents relating to section 5.1 of the Hastie Report, specifically documents evidencing (a) discussions between the [Council] and [its] external auditors… and (b) the [Council’s] analysis of the financial and reputational risks associated with different options”. After the recent disclosure of documents by the Council, that category is no longer pursued.
26. Category 4 comprises documents relating to the first witness statement of Mr Hastie and particularly documents relating to the two specific assertions made in that statement.
27. First, there is the assertion that “PWC were also confident that the best possible deal had been achieved”. However, no application is pursued in respect of that assertion.
28. Second, there is the assertion that that Mr Hastie and his colleagues “undertook the necessary financial analysis to determine whether the Council should provide loan finance to ACL, and if so the terms on which it should do so. This involved a detailed assessment of the ACL business plan, careful consideration of its ability to finance any pro-posed loan repayment and the development of a refinancing proposal”.
29. Mr Thompson complains that, although Ms Forde says that such documents have now been disclosed, she adds “but only insofar as [the Council] considers it is reasonably required to do so;” and she notes (without more) than the Council has not provided documents relating to discussion of the draft financial statements of the implications of the alternative loan arrangements. So, he submits, there are clearly other documents that are relevant to the issues that have not been disclosed. They are not only pertinent but potentially crucial, he says, to the private investor test issue which lies at the heart of the Claimant’s primary ground. In particular, it is essential for the court to understand what financial analysis was carried out by the Council in relation to ACL’s ability to service the large loan which the Council proposed to make.
30. However, as Mr Goudie submitted, one has to maintain focus upon the determinative issue in the primary case in this claim: the court is required to assess whether a private investor would have made the loan that was made, and on the terms that it was made, in light of the information available at that time. That is the purpose of judicial review pro-ceedings, which are particularly focused upon the challenged decision and the information upon which the decision was made, and more generally the process by which it was made. It is not a more general investigation as to whether the decision is justifiable in terms of any other analysis. For those reasons, the material now sought to be disclosed is not, in my view, necessary for the fair and proper determination of the issue that is before the court.
31. As Category 5, the Claimants seek Board Minutes of ACL from 2012 to February 2013 such as relate to the issues in this claim. The Council nominated two of the four directors of ACL (Mr West and Mr Reeves), and, Mr Thompson submits, it is inconceivable that the Council do not have these documents. Mr Goudie said that the minutes of a particular important meeting – that of 29 August 2012 – which have been notably sought by the Claimants, have now been obtained by the Council which is prepared to disclose them, subject to some redaction of references to legal advice. Those minutes consequently will be disclosed. However, in respect of any other minutes that there might be, these are ACL documents, and not documents that are under the control of the Council. In any event, Mr Goudie says (and I accept) that the searches to which I have already referred have not disclosed any of these minutes in the hands of the Council. Those searches have included, not only searches of hard copy material, but also computer searches, including the personal computers of Mr West and Mr Reeves. For those reasons, I shall refuse the application in respect of the Category 5 documents too.
32. Finally, Category 6 relates to legal advice provided to the Council in relation to the decision. Mr Thompson of course accepts that, usually, such advice would be the subject of privilege and therefore not discloseable. But, he con-tends, by referring to and relying upon that advice in its summary grounds, the Council waived that privilege. The Hastie report refers to advice obtained in 2003, which, it says, would not be altered by the change of chargee from the Bank to the Council. The 2003 advice is already in the hands of the Claimants (although, as I understand it, it is not entirely clear as to how they obtained it, nor for the purposes of these applications does that matter). However, Mr Thompson submits that it can reasonably be inferred that further advice was taken recently. For example, the Council’s summary grounds say that the Council was careful to ensure there was no breach of the state aid rules; and the Hastie report refers to legal advice being sought and has a section headed “legal implications” which appears to be a summary of legal advice received. In short, the Council, he submits, has sought to rely on legal advice over and above than the 2003 advice; and, having done so, it has put it in evidence and must be taken as waiving privilege in respect of it.
33. The legal principles are again uncontroversial, being helpfully set out in the judgment of the President of the Employment Appeal Tribunal, Elias J (as he then was), in Brennan v Sunderland City Council [2009] ICR 479, particularly at [63]-[67], and [77]. On the basis of those principles, it seems to me that it is not arguable that the Council have waived privilege in the advice as Mr Thompson contends. Elias J makes it clear (at [77]) that what potentially attracts the waiver is the fact that the party has chosen to rely on legal advice to an extent that would make it unconscionable to withhold the full advice; and, in particular, the disclosure of merely the effect of the advice is insufficient to amount to a waiver. In my judgment, looking at the terms of the Hastie report and the other circumstances of this case, the criteria for waiver in light of that guidance do not begin to apply here. That was Mr Goudie’s submission; I agree with it.
34. For those reasons, I refuse the application for specific disclosure.
35. The Claimant’s second application is to rely upon further evidence of Ms Seppala. Mr Thompson descibes her statement is “very long” (skeleton argument, paragraph 47(2)). That description is certainly accurate. Ms Seppala is the founder and Chief Executive Officer of SISU Capital Limited (a company, of course, within the SISU Group), which is an investment manager for other group companies, including the Second Claimant.
36. Ms Seppala’s statement, as I have indicated, is nearly 350 paragraphs long, covering 110 pages and is accompa-nied by over 1,000 pages of exhibits. It covers a very considerable amount of ground. Mr Thompson submits that this new evidence has been triggered by the additional documentary evidence which emerged from the AEHC proceedings, and also gaps and inaccuracies in Mr Hastie’s statement. It elucidates, he says, the background to the negotiations between the SISU Group, the Council, AEHC and ACL. It explains those negotiations, and the Council’s parallel ap-proach to the Bank in the light of the AEHC documents. It sets out her views on the Hastie report, and it casts light on the events post‑dating the challenged decision.
37. The first thing to note, again, is that the focus of this claim is upon the Council’s decision of 15 January, and the information that went to that decision and the circumstances of it. The negotiations to which Mr Thompson refers are no more and no less than background to that decision. Ms Seppala goes through the documents in very great detail, offering a commentary upon them. Most of her comments, such as they are relevant to the determinative issues in this claim, are effectively by way of submissions which can (and, no doubt, will) be made in a different way in due course.
38. The statement is extremely long; and, in my view, it is unnecessary for the fair and proper determination of the issues which the court has to deal, which, as I have indicated, are relatively narrow.
39. Furthermore, the evidence has been prepared very late indeed. Even if Ms Seppala has referred to the docu-ments in the AEHC proceedings, her evidence with regard to the chronology and Mr Hastie’s statement could (and, if it were relevant, should) have been prepared and served long since.
40. For both of those reasons, the application to rely upon Ms Seppala’s statement is refused.
41. Finally, the Claimants apply for permission to rely upon expert evidence in the form of a 45‑page report of Mr James Palmer of Duff & Phelps. Mr Palmer is a Chartered Accountant who is an expert valuer in the business context, including expertise in the valuation of loans. His report conducts a forensic exercise on the Hastie report, concluding that it is deficient in a number of ways and concluding that in his opinion a private investor with a 50 per cent share-holding in ACL would have explored alternative options, including placing ACL into administration, in preference to making a £14.4m loan to ACL on the terms of this loan.
42. The role of this court in considering whether the loan was state aid (that is, a transaction that a private investor would make) is one of review. It is true that it is not one restricted to Wednesbury review – the review is to a more rigorous standard than that – but it is not for this court to impose its judgment as to whether a particular private investor would or would not have entered into this transaction. This court consequently will not enter into a conflict of evidence between experts as to whether the decision was in fact justified.
43. Mr Goudie submits that, although they be issues as to precedent fact, expert evidence is not required in respect of such issues as these, because the decision-maker (the Council) has a margin of judgment and that margin is wide. In support of that submission, he referred to the Commission Communication to Member States 93/C 307/03, and particu-larly paragraph 27 within part 5 of that document. That paragraph indicates that, so far as the Commission is concerned, the very nature of the issue of whether a private investor would enter into a transaction implies a wide margin of judgment on the part of the investor and consequently a wide margin in discretion when any decision falls into the hands of the state with regard to whether a matter is state aid or not.
44. In my judgment, this evidence is not relevant – and is certainly not necessary – for the fair and just determination of the issues with which the court has to grapple.
45. Furthermore, again, this evidence is extremely late. Even if the disclosure of documents by the Council recently was unduly late, it seems to me that none of those documents could have had an impact upon whether expert evidence was going to be produced and relied on. If this expert evidence was allowed in, Mr Goudie submits that he would be entitled to respond to it, a matter which Mr Thompson properly concedes. In the circumstances, it seems to me highly likely – to the extent of being almost certain – that the hearing date in June would be lost.
46. For each of those reasons, both with regard to timing and with regard to substance, the application to rely upon expert evidence is also refused.
As Joe Barrett points out, the ruling of Higginbottom J is an interesting indication of the approach the courts may take in cases where a company wants to challenge by way of judicial review a public investment made by a competitor. But it is not clear, at least to this writer, that it is correct.
It is true that in order to prove that the recipient of the advantage has received a State aid, the person asserting that there is an aid must show that the recipient could not have obtained the same investment from a private sector investor in the same situation as the public authority. If the answer is that some private sector investors would have made that investment but some would not (i.e. that the investment is within a range of normal commercial responses to a particular situation) then the claimant will lose. Put shortly, therefore, evidence in the form “I am an expert in private sector investments of this kind and I would not have advised making this investment” gets the claimant nowhere: to succeed, the witness statement would need to go on to show that no normal commercial investor, in that situation, would have made that investment. But if the claimant can show that no normal commercial investor would have made the investment then there is a State aid – and the possibly reasonable but erroneous belief by the authority that a commercial operator would have done the same thing is neither here nor there.
In the Sky Blue case, the claimant tried to rely on a report by an accountant, Mr Palmer. It is not entirely clear from the report what side of the line Mr Palmer’s report fell. But if his report was to the effect that no normal private investor would have made that investment, it is hard to see that Higginbottom J’s decision was the right one (although there seem to have been some other factors at play, such as lateness).
As Lord Woolfe MR pointed out in R v CEC ex parte Lunn Poly [1999] 1 CMLR 1357 at §24: “I have no doubt that the role of the court is to come to a decision for itself whether or not there has been a contravention of the final sentence of Article [108](3) [TFEU]. This is not an isolated situation for a court on an application for judicial review to have to do this. The same task has to be performed whenever the legality of the conduct of a public authority depends on a question of what is conveniently described as “precedent fact”. Where the issue is one of precedent fact, then sometimes it is necessary for there to be oral evidence and cross-examination. This was the position in R. v. the Attorney General, Ex parte ICI Plc. In this case there was sensibly no application for cross-examination. While the task may be difficult, the Divisional Court, and this court on appeal, is usually well able to decide the relevant facts without the need for cross-examination of the evidence which was given by affidavit.” In that case the Court of Appeal upheld the decision of the Divisional Court to review affidavit evidence before it and to make findings on the potential effect of the alleged aid on competition and on trade between member States.
It seems to this writer that, in principle, any judicial review court faced with an arguable contention that an investment confers an advantage and is hence State aid because no normal private investor would have made it has little option but to get to grips with that evidence and to decide it as a matter of precedent fact. If that means oral evidence and cross-examination, then so be it (although the modern trend in all litigation is manage expert evidence carefully so as to limit the matters on which cross-examination is called for). In doing so, the court is not seeking to answer the question whether the investment was a sensible commercial investment (which is indeed the wrong question): what it is seeking to do is to answer the correct question of whether any normal commercial investor would have made the investment. And if the court declines to do that, the risk is that any State aid challenge by way of judicial review will be impossible in any case where the public authority believed that it was acting as a commercial investor would have done, even if the evidence is clear that it was wrong to take that view. Since that situation is by no means unknown, the approach of Higginbottom J does cause this writer some concern.