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You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> London Electricity Plc, R (on the application of) v Director General Of Electricity Supply [2000] EWHC Admin 340 (15 May 2000)
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Cite as: [2000] EWHC Admin 340
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QUEEN V DIRECTOR GENERAL OF ELECTRICITY SUPPLY Ex parte LONDON ELECTRICITY plc [2000] EWHC Admin 340 (15th May, 2000)
Case No: CO/1582 /99
IN THE SUPREME COURT OF JUDICATURE
QUEENS BENCH DIVISION
CROWN OFFICE LIST
Royal Courts of Justice
Strand, London, WC2A 2LL
Monday 15 May 2000
V
LONDON ELECTRICITY plc Applicants
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
__________________________________
Richard Field QC and Nigel Giffin - for the Applicants
(Instructed by Herbert Smith Solicitors)
Kenneth Parker QC and Mark Shaw - for the Respondent
(Instructed by Treasury Solicitor)
Judgment
As Approved by the Court
Crown Copyright ©
Introduction
This is an application for judicial review of a determination made on behalf
of the respondent, the Director General of Electricity Supply ("the Director
General"), by Mr Saunders, who is the Director of Regulation and Business
Affairs at the Office of Electricity Regulation ("Offer"). The determination
was made on 27 January 1999 with reasons given later on 7 April 1999. The
determination was that the charge which the applicant, a public electricity
supplier, might properly require Mrs Elnaugh to pay for an upgraded supply of
electricity to her home was zero.
Mrs Elnaugh is a resident of Mitcham Garden Village ("the Village"). The
Village consists of some 88 dwellings which are all owned by the Mitcham Garden
Village Trust ("the Trust") which is a registered charity with the object of
providing housing accommodation for the elderly, In February 1997 the Trust
proposed to install electricity night storage heating in the dwellings in the
Village. That would have involved a very significant increase in the peak
night demand for electricity, necessitating reinforcement works to the
distribution system including the provision of a new transformer and
substation, the total cost of the works being £44,693. The Trust was
unwilling to pay for the reinforcement costs but, following discussions with
Offer, it was decided to deal with the matter by way of separate applications
by the individual tenants of the dwellings rather than by way of an application
by the Trust itself. Under a principle contained in a condition of the
applicant's licence, to which I will have to refer but which is known
colloquially as the "25% rule", no charge is normally made for reinforcement
works to the distribution system if the new or increased load requirement does
not exceed 25% of the existing effective capacity at the relevant point of the
system. None of the individual applications for connection by the tenants
would, in themselves, taken individually, have resulted in a load requirement
in excess of 25% of the existing capacity of the system. Twelve of them could
have been accommodated within the existing capacity in any event. However, the
cumulative increased load from all the night storage heaters would have
exceeded 25% of the existing capacity of the system.
A number of individual applications were made by tenants but Mrs Elnaugh's
application was dealt with as the lead application for the purposes of
resolving the dispute about payment for the reinforcement costs. The
applicant offered Mrs Elnaugh terms for connecting her night storage heater
which included a proposed charge of £508. That charge reflected her
proportionate share of the total reinforcement costs. It was unacceptable to
Mrs Elnaugh, so the applicant referred the dispute to the Director General for
resolution. As I have mentioned, the Director General determined that no
charge for the connection should be payable by Mrs Elnaugh. That is the
determination under challenge. It gives rise to the issue whether the matter
should have been dealt with by treating the effect of each application
individually or whether the effect of the whole project should be taken into
account when dealing with each of the applications. The applicant refers to it
as "disaggregation or aggregation" and the Director General refers to it as an
"individualised approach or a global approach."
There is a dispute between the parties as to the appropriate test to be
applied in resolving that issue. It is said to raise an important point of
principle which could have significant commercial consequences for the
electricity supply industry generally, although the amount at stake in this
case is, in itself, relatively modest. The applicant, being anxious that this
point of principle should be decided by the court, but recognising the
uncertainty caused to the residents of the Village by the case, has undertaken
to ensure that, if its application succeeds, they will not be left out of
pocket.
Statutory and licensing provisions
I should first refer to the statutory provisions and to the conditions of the
applicant's licence which are relevant to a consideration of the issues in this
case.
The statutory regime is contained in the Electricity Act 1989. Section 3 contains the duties imposed on the Director General. Under subsection (1) he has to exercise his function in the manner which he considers is best calculated to secure that all reasonable demands for electricity are satisfied, to secure that licence holders are able to finance the carrying on of their authorised activities and to promote competition in the generation and supply of electricity. Under subsection (3), and subject to the duties in subsection (1), the Director General has a duty to exercise his functions in the manner which he considers is best calculated, inter alia, to promote the interests of consumers and to promote efficiency and economy in the supply and use of electricity.
Section 6 provides for the grant of licences authorising the licensee (known as
a "public electricity supplier") to supply electricity to premises in the
supplier's authorised area. Section 7 deals with the categories of conditions
which may be included in a licence. Section 7(3) provides that such conditions
may require the licence holder to refer for determination by the Director
General such questions arising under the licence as are specified in the
licence or are of a description so specified.
Section 9 imposes a duty on public electricity suppliers to develop and
maintain an efficient, co-ordinated and economical system of electricity
supply.
Section 16 imposes a duty on a public electricity supplier, upon being required
to do so by the owner or occupier of any premises, to give a supply of
electricity to those premises and, so far as may be necessary for that purpose,
to provide electric lines or electrical plant or both. Having received
notification of a request for a supply of electricity, the supplier has to
serve a notice on the person requesting the supply containing a number of
matters which include specification of any payment which that person will by
required to make under section 19(1) of the Act.
Section 17(2)(c) provides that nothing in section 16 shall be taken as
requiring a public electricity supplier to supply electricity to any premises
if it is not reasonable in all the circumstances for him to be required to do
so.
Section 19 (1) provides as follows:-
"Where any electric line or electrical plant is provided by a public
electricity supplier in pursuance of section 16(1) above, the supplier may
require any expenses reasonably incurred in providing it to be defrayed by the
person requiring the supply of electricity to such extent as is reasonable in
all the circumstances".
Finally, so far as the Act is concerned, section 23 enables a public
electricity supplier or a person requiring a supply of electricity to refer any
dispute between them under sections 16 to 22 for determination by the Director
General who makes the determination by an order which has to include his
reasons for reaching his decision.
Turning to the terms of the applicant's licence, Condition 1, paragraph 1
provides that, unless the contrary contention appears, words and expressions
used in the conditions of the licence are to be construed as if they were an
Act of Parliament and the Interpretation Act 1978 is applied to them.
The relevant terms of the applicant's licence as a public electricity supplier
are to be found in Condition 8 of the licence. Condition 8, paragraph 1
requires the licensee to prepare a statement in a form approved by the Director
General (known as a Condition 8 statement) setting out the basis on which
certain charges (including charges for use of system and for connection) will
be made. Condition 8, paragraph 5 spells out in greater detail what has to be
in the statement relating to connection to the supplier's distribution
system.
Condition 8, paragraph 9 provides that connection charges shall be set at a
level which will enable the licensee to recover, firstly, the appropriate
proportion of the costs directly or indirectly incurred in carrying out, inter
alia, the extension or reinforcement of the licensee's distribution system and,
secondly, a reasonable rate of return on the capital represented by such
costs.
Condition 8B, paragraph 2 requires that, on application by any person, the
licensee shall offer to enter into an agreement for the provision of a
connection or for the modification of an existing connection to the
distribution system. The offer has to make detailed provision regarding, inter
alia, the connection charges to be paid to the licensee. Unless manifestly
inappropriate, the charges must be presented in a way referable to the
condition 8 statement and must be set in conformity with condition 8, paragraph
9 and (where relevant) condition 8B, paragraph 5.
Condition 8B, paragraph 5 provides as follows:
"For the purpose of determining an appropriate proportion of the costs
directly or indirectly incurred in carrying out works under an agreement for
making a connection or modification to an existing connection, the Licensee
shall have regard to:
(a) the benefit (if any) to be obtained or likely in the future to be
obtained by the Licensee or any other person as a result of the carrying out of
such works whether by reason of the reinforcement or extension of the
Licensee's Distribution System or the provision of additional entry or exit
points on such system or otherwise;
(b) the ability or likely future ability of the Licensee to recoup a
proportion of such costs from third parties; and
(c) the principles that:
(i) no charge will normally be made for reinforcement of the existing
Distribution System if the new or increased load requirement does not exceed 25
per cent of the existing effective capacity at the relevant points on the
system; and
(ii) charges will not generally take into account system reinforcement
carried out at more than one voltage level above the voltage of
connection."
It is condition 8B, paragraph 5(c)(i) that contains "the 25% rule" which is the
main subject of controversy in this case.
Finally, so far as the contents of the licence are concerned, Condition 8D,
paragraph 1 empowers the Director General to settle any dispute about the terms
of an agreement between the licensee and a person requiring the provision of,
or modification to, a connection. The Director General can settle the terms
of the agreement in such manner as appears to him to be reasonable having
regard, inter alia, to the consideration that such person should pay to the
licensee the whole or an appropriate proportion (as determined in accordance
with paragraph 5 of Condition 8B), of the cost referred to in sub-paragraph
9(a) of Condition 8, together with a reasonable rate of return on the capital
represented by such costs.
The applicant's current Condition 8 statement was promulgated in April 1998.
Paragraph 2 of Appendix 1 of the statement deals with reinforcement of the
existing system. Paragraph 2.1(a) states that reinforcement of the existing
system will be included in the connection charge save that no charge will
normally be made for reinforcement of the existing distribution system if the
new or increased load requirement does not exceed 25% of the existing effective
capacity at the relevant point on the system. There then follows Note 1 which
states;-
"Previous related increases will be taken into account in deciding whether the
aggregate load requirement meets the 25% test".
It is clear from other documentation that the purpose of taking previous
related increases into account in deciding whether the aggregate load
requirement meets the 25% test is to guard against a customer reducing
connection charges by artificially seeking a succession of incremental
upgrades.
The position therefore is that a person requiring a new or enhanced supply of
electricity must generally pay for additional plant or line (or modifications
to existing plant and line), required for that purpose at a level which
compensates the applicant for its costs and provides it with a reasonable rate
of return upon its capital. However, where the increased requirement does not
exceed 25% of existing effective capacity, no such charge for reinforcement of
the distribution system will normally be made. Furthermore, in applying the
25% rule, regard will be paid to previous related increases.
The charging system distinguishes between use of system charges and connection
charges. Expenditure caused by normal load growth is recovered by way of use
of system charges from customers generally. Expenditure caused by an
identifiable specific demand is recovered by connection charges in accordance
with section 19 of the 1989 Act and Condition 8 to 8D of the licence, subject
to the 25% rule. The point at issue in this case is, in reality, whether that
identifiable specific demand can arise from a number of customers with related
increases arising from a single project or whether it is restricted to an
increase from an individual customer.
Factual background
Having dealt with the general principles of the charging regime arising from
the statutory and licensing provisions, I turn next to the factual background
relating to the way in which the question of payment for the reinforcement
works necessitated by the installation of the night storage heaters in the
dwellings in the village was dealt with.
The matter was first raised by the Trust in February 1997. The Trust was
informed by the applicant that reinforcement works would be necessary and that
the Trust would have to be responsible for the cost of the works.
In the ensuing correspondence it was clear that the Trust was making the
application as a single entity. It had decided to install the night storage
heating in the village, it had obtained a single quote from Seeboard for the
supply of the equipment, it had arranged for grant applications to be made to
the local authority by residents who qualified for a grant and it paid for the
equipment itself in cases where grants were not forthcoming.
In October 1997 the Trust referred the matter to Offer, maintaining that the
applicant should be responsible for the cost of the reinforcement works. On
19 December 1997 the Regional Manager of Offer decided that the dispute was not
determinable because the Trust was not the person requiring a supply of
electricity within the meaning of section 23 of the 1989 Act. The applicant
contends that that was an erroneous decision, but it is not the subject matter
of these proceedings and I have not heard any argument relating to it. Offer
then suggested to the Trust that the individual residents should make their own
applications to the applicant, no doubt with a view to each of those
individual applicants seeking to take advantage of the 25% rule. As a result,
the Trust arranged for the individual applications to be made. In fact, all
the night storage heaters had already been installed before the individual
requests for the upgraded supply were made.
As I have already mentioned, Mrs Elnaugh's application was dealt with as the
lead application. The applicant refused to offer any terms to her and insisted
on treating the Trust as the true customer. Alternatively, the applicant
relied on section 17(2) of the 1989 Act maintaining that it was not reasonable
to be required to supply her if a connection charge was not to be paid.
Mrs Elnaugh referred the dispute to the Director General. On 24 November 1998
Mr Saunders, acting on behalf of the Director General, determined that the
applicant was under a duty to supply Mrs Elnaugh. The applicant does not
challenge that decision. Mr Saunders added the following observation at the
end of his determination:-
"As a consequence of this determination, I now expect the Company to offer
terms for the required works to Mrs Elnaugh. In making such an offer I expect
the Company to be cognisant of its normal charging principles, including
application of the 25% rule, as set out in its published charging
statement".
The applicant, however, held to the view that the 25% rule had no application
where the request for an increased supply was not an independent request but
was part and parcel of an overall scheme giving rise to an increase in excess
of 25%. On 13 January 1999 the applicant therefore offered Mrs Elnaugh terms
of connection which included the proposed charge of £508. In the letter
of 13 January 1999 the applicant stated:-
"Bearing in mind that your connection is only part of a larger project, the
charge payable by you under our terms of connection is derived from the total
connection charge calculated for the complete project, in reflection of our
normal charging principles as applied in the Village context, divided equally
by the number of customers within the village (88) whom we constructively
believe will benefit from the project by reason of their take-up of new storage
heating capacity".
Those terms were rejected by Mrs Elnaugh and, on 22 January 1999, the applicant
applied to the Director General under Condition 8D of its licence for him to
settle the terms of the agreement for the provision of Mrs Elnaugh's upgraded
supply. On 26 January 1999 the applicant sent the Director General its
detailed submissions in support of its case, referring, inter alia, to the
collective nature of the project with the residents joining together through
the aegis of the Trust to switch to night storage heating.
Remarkably, the Director General's decision was made by Mr Saunders the next
day on 27 January 1999. Despite the reasons given by Mr Saunders for the speed
of the decision, I feel sure that, commendable as the speed of the decision
was, it must have been at least partly due to the fact that the local Member of
Parliament had secured an adjournment debate in the House of Commons on this
subject that afternoon. Mr Saunders faxed through to her a copy of his
decision which she was able to refer to during the debate.
Perhaps not surprisingly in the circumstances, the determination was very
short. It stated:-
"2.1 I determine that the charge which the company may properly require the
customer to pay is zero.
2.2 I will publish my reasons for this decision in due course".
The applicant immediately issued a press statement saying that it was minded to
apply for judicial review, subject to seeing the reasons for the decision.
Those reasons were not given until 8 April 1999 due to pressure of work in Mr
Saunders' department.
The reasons are contained in paragraphs 5.1 to 5.6 of the document issued by
Mr Saunders. In paragraph 5.1 it is accepted that reinforcement works would be
necessary if night storage heating was installed in each of the dwellings.
Paragraph 5.2 states:-
"The Company has connected the Customer to the network, and no reinforcement
of the network was required in order to do so. Consequently, no costs were
incurred in reinforcing the network, and there is nothing to pass on to the
Customer. The only costs that were incurred were those associated with the
change of metering, for which the Company has not sought any charges. On this
ground alone, the Company has failed to justify imposing a connection charge on
the Customer".
Paragraph 5.3 refers to the applicant's argument contained in its written
submissions.
Paragraphs 5.4 to 5.6 state as follows:-
5.4 "It is accepted that the Customer's new heating system will increase
the load on the local network, but by an amount which is far below 25% of the
existing effective capacity. Since I have already determined that it is the
Customer and not the Trust who is supplied by the Company, it follows that the
premises which attract any connection charge are the Premises (that is, the
flat which the customer occupies) and accordingly the normal operation of the
25% rule would prevent the Company from recovering from the Customer any part
of the cost of reinforcing the system.
5.5 I need to consider whether the circumstances in which the Customer
seeks a modification to her connection are such as to justify not applying the
25% rule. When the occupier of a house in a street of houses installs off-peak
heating, the character of his demand changes in the same way as the Customer's
has. Yet the 25% rule would apply to that occupier. And it would apply even
if his neighbours chose to do the same, so that the cumulative effect was that
the aggregate new demand exceeded 25% of existing effective capacity. I do not
consider that there are any circumstances to justify treating the Customer
differently from such an occupier. I do not consider that it is justifiable to
treat her differently because she happens to be a tenant rather that a
freeholder; because her neighbours happen to be tenants of the same landlord;
or because she and some (or all) of her neighbours are elderly persons eligible
for grant aid to assist with the cost of installing off-peak heating.
5.6 While I have not considered the circumstances of the other 87
Dwellings, and while each case must be determined in the light of its own
circumstances, it may well prove difficult to justify recovering the costs of
reinforcing the system from the occupier of any of the other Dwellings".
A postcript to the reasons document states that, although the applicant had
referred the dispute to the Director General under condition 8D of its licence,
the matter should strictly have been referred under section 23 of the Act.
Both parties, however, are agreed that nothing turns on that point.
It is part of the applicant's case that those reasons are wholly inadequate in
that they completely fail to address the point in issue. It is further
contended that the Director General should not be allowed to make good that
inadequacy by relying on the matters now advanced by Mr Saunders in his written
statement.
However, before coming to the question of the adequacy of the reasons given for
the decision, it is necessary first to deal with the main issue in the case.
Submissions on the main issue
The main issue in the case is, what is the correct test to apply in order to
decide whether the applications should be treated individually, each taking
advantage of the 25% rule, or whether the whole project should be taken into
account when dealing with each of the applications? In other words, what is
the correct test to apply in deciding whether to adopt an individualised
approach or a global approach?
Both sides accept that the identification of the appropriate test is a matter
of law for the court to decide, involving a question of construction of the
statutory and licensing provisions. The application of the appropriate test to
the facts involves the exercise of judgment by the Director General who can
claim a margin of appreciation in arriving at his decision. It is accepted on
behalf of the Director General that there can be occasions when it is right to
take the global approach, but it is contended that it is not right to do so in
the circumstances of this case.
Mr Field QC submitted on behalf of the applicant that the test is one of
causation, namely whether the individual requests are in truth part of a single
larger scheme or project which is the cause of the necessity for the
reinforcement works. He suggested that the right question for the Director
General is whether the need for the reinforcement works is linked to, or arises
out of, the causally connected actions of a number of individuals such that
those individual actions are not properly to be regarded as separate causes of
the need for the reinforcement works but are rather simply parts of a single
overall cause of the need for the reinforcement works. Mr Field submitted that
such a test gives effect to the purpose of the 25% rule in that a customer
whose own small requirement for a new or increased supply arises
independently of the enhanced requirement or other customers, but who, coming
after those customers, happens to tip the balance and render the reinforcement
works necessary, has not by himself truly caused that need for reinforcement -
he is simply the straw that broke the camel's back. However, a group of
customers, whose requests for a new or increased supply are inter-linked
collectively, represent the cause of the need for reinforcement. They are, it
is said, not separate straws but a bale of hay bound together. They have
together caused the need for reinforcement and it makes no difference whether
their demands are expressed as a single request by the common owner of the
properties or as a series of individual requests by the occupiers. Applying
that test to the circumstances of this case, it was submitted that there is
only one answer - namely, that the night storage heating project was a single
project which was the cause of the need for the reinforcement works.
Mr Parker QC, on the other hand, submitted on behalf of the Director General
that the 25% rule is based on non-discrimination and fairness between customers
and that it involves the rejection of causation as the touchstone. Indeed, to
go back to causation would, he said, involve going back to the mischief that
the 25% rule was designed to avoid. Mr Parker submitted that the correct test
to adopt is to determine whether there is an arrangement involving at least a
moral obligation between the residents to participate in the night storage
heating scheme. That test was derived from the Court of Appeal's
interpretation of the word "arrangement" in section 6(3) of the Restrictive
Trade Practices Act 1956 in the case of Re British Basic Slag, Ltd's
Agreements (1963) 2 All ER 807. Wilmer L.J. stated at p814:-
...when each of two or more parties intentionally arouses in the other an
expectation that he will act in a certain way, it seems to me that he incurs at
least a moral obligation to do so. An arrangement as so defined is therefore
something `whereby the parties to it accept mutual rights and obligations'."
Applying that test to the circumstances of this case, Mr Parker submitted
that, although the Trust understandably initiated, co-ordinated, arranged and
managed the scheme, each resident still took an independent decision whether to
take advantage of the facility. No resident was under any obligation, moral or
otherwise, to do so. Mr Saunders, in his witness statement, and Mr Parker in
his submissions laid great stress on the freedom of choice of the residents and
the voluntary nature of their decisions. In those circumstances, the primary
submission on behalf of the Director General was that it was right to take the
"individualised" approach to the facts of the case. Alternatively, it was
submitted that it was a matter upon which different decision makers might
rationally reach different conclusions and that it was within the Director
General's margin of appreciation to reach the decision that he did.
Decision on the main issue
Dealing first with the test to be applied, I consider that the appropriate
test is one of causation. That is consistent with the charging regime
contained in the statutory and licensing provisions. Expenditure caused by
normal load growth is recovered from customers generally by way of use of
system charges. The 25% rule ensures that an increased load requirement within
the scope of that rule will normally be recovered by way of use of system
charges. That is not only fair but it also serves to provide a yardstick for
distinguishing normal load growth from growth caused by an identifiable
specific demand which causes an increased load requirement over the 25% limit.
Where that increased demand arises from a single identifiable project or
scheme, it would be unrealistic and contrary to the purpose of section 19 of
the Act to allow it to be broken down into the individual requirements of each
of the customers involved in the project, each claiming the benefit of the 25%
rule, thereby enabling avoidance of payment of the connection charges by those
requiring and benefiting from the increased supply with the result that the
cost is borne by customers generally by way of use of system charges. The
rationale of section 19 is that those who require an increased supply should
pay for it to such an extent as is reasonable in the circumstances. Such a
disaggregation of the components of the project would, in my view, constitute a
device to avoid the reality of the situation which is that there is a single
cause for the increased supply constituted by the single identifiable project.
It is interesting to note that, under the applicant's existing Condition 8
statement, previous related increases are taken into account in deciding
whether the aggregate load requirement exceeds the 25% limit, the purpose of
that provision being to guard against a customer reducing connection charges by
artificially seeking a succession of incremental upgrades. That provision is,
of course, dealing with a single customer, but the same concept of
artificiality and contrivance can equally be applied to the disaggregation of
the component parts of a single identifiable project which causes an increased
load requirement over the 25% limit.
In my judgment it would not be appropriate to import from the law relating to
restrictive trade practices the test of an arrangement involving at least a
moral obligation to participate in the scheme. The Restrictive Trade Practices
Act 1956 is dealing with a very different subject matter and the word
"arrangement" is expressly used in that context in section 6(3) of the Act,
whereas in this case the word "arrangement" does not appear either in the 1989
Act or in the licence itself. In my view, a causative test, involving, if it
be the case, the identification of a single project or scheme which causes the
reinforcement works, is the appropriate test, whether or not that causative
scheme or project involves a moral obligation to participate in it.
Applying that test to the facts of this case, there can, in my judgment, be
only one answer, namely that the increased supply which necessitated the
reinforcement works was caused by the collective night storage heating project.
The Trust initiated, co-ordinated, arranged and managed that project. Whilst I
appreciate that the Trust's co-ordinating role was for the benefit of the
residents who were elderly and of modest means, the fact remains that it was
the Trust who devised and initiated the project and who even paid for the
equipment for residents who did not obtain grants from the local authority.
The Trust's role clearly identified a single cohesive project or scheme. It
was not until Offer suggested that the individual residents should make their
own applications that the applicability of the 25% rule to the individual
applications came into play, but the existence of the individual applications
cannot mask the undoubted existence of the single identifiable project for the
installation of the night storage heating in the Village. I have no doubt that
it was that project which caused the increased demand necessitating the
reinforcement works and that it would be unreasonable and wrong to hold
otherwise by disaggregating that project into the residents' individual
applications, thereby throwing the cost onto consumers generally as if it were
natural load growth within the 25% rule.
I entirely appreciate and accept that each resident made a bona fide and
voluntary decision of his or her own free choice to join the scheme or project,
but the fact that a decision to join the scheme is made out of free choice does
not alter the fact that the scheme exists. The more people join it voluntarily
and of their own free choice, the more the collective nature of the scheme is
increased. I do not see the residents' freedom of choice as being
determinative of the issue.
I therefore hold that the Director General applied the wrong test in this case
and that, if he had applied the correct test, the inevitable conclusion would
have been that the increased demand necessitating the reinforcement works was
caused by the night storage heating project. The result is that the benefit of
the 25% rule cannot be claimed. The residents involved in the scheme are
therefore liable to pay their proportionate share of the expenses reasonably
incurred by the applicant in carrying out the reinforcement works to such
extent as is reasonable in all the circumstances.
Reasons challenge
I should also add that I consider that the reasons given by the Director
General on 7 April 1999 are inadequate because they simply do not address the
main point in issue raised by the applicant. Furthermore, if one compares the
points made by Mr Saunders in his witness statement with the reasons given on 7
April 1999, the inescapable conclusion is that they are very different. I
would have been very reluctant to accept that the points made by Mr Saunders in
his witness statement were merely elucidation of the reasons that had been
given. The reasons were given over two months after the determination and in
the knowledge that the applicant was minded to seek judicial review, subject to
seeing the reasons for the determination. The points made in Mr Saunders'
witness statement seem to me to smack of ex post facto rationalisation having
seen the grounds advanced by the applicant in its Form 86A. However, in view
of my conclusion as to the appropriate test to be applied and the inevitable
result of its application, it is not necessary for me to decide whether Mr
Saunders should be allowed to rely on the reasoning contained in his witness
statement in substitution for, or in addition to, the reasons given on 7 April
1999.
Conclusion
For the reasons I have given, there will be an order of certiorari to quash
the Director General's determination. I will hear submissions from counsel as
to whether, in the light of this judgment, it is necessary to consider the
grant of the declaratory relief sought.
(Submissions by Counsel)
MR JUSTICE HARRISON: Thank you very much. My conclusion on the point of permission to appeal is that I do not think it appropriate to grant permission to appeal. Therefore, leave is refused, and costs to the applicant. I also make an interim award of £50,000 to be paid within 28 days.
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