JUDGMENT of Mr Justice William M. McKechnie delivered on the 29th day of May, 2019
Introduction
1. The opening sentence of the judgment under appeal succinctly captures the issue at the core of these proceedings: does the Circuit Court have jurisdiction to determine by way of a defence to a claim for unpaid local authority rates that the enforcement and recovery of the rate in question amounts to a form of State Aid contrary to the provisions of Article 107(1) of the Treaty on the Functioning of the European Union?
2. The Plaintiff (referred to in this judgment as "the Council" or "the Respondent") is the rating authority for the administrative area of Dún Laoghaire-Rathdown County Council. The Defendant (referred to in this judgment as "West Wood" or "the Appellant") operates a number of leisure and sports and fitness clubs. One such premises is situated at Leopardstown, within the administrative area of the plaintiff Council. It is therefore liable to pay rates to the Council.
3. It is accepted by all that the Council itself operates for profit a number of sports and leisure facilities - gyms, tennis courts, swimming pools and such like - similar to those operated by West Wood. It is therefore in competition with the Defendant.
4. The Plaintiff has brought three sets of proceedings against the Defendant in the Circuit Court for unpaid rates. The Defendant wishes to advance as its defence to this claim the argument that the Plaintiff is operating leisure facilities in competition with it; that the Plaintiff's facilities are not subject to rates; that the funding received by the Plaintiff from commercial rates and from other State sources constitutes an unlawful form of State Aid, contrary to EU law; and that the rates are therefore unenforceable. The Defendant has also counterclaimed for damages but only in order to allow the Court, if it felt obliged to grant a decree for the amount sought by the Council, to then in turn nullify the unlawful consequences of what it says would be a breach of EU law. Originally it also advanced an argument that the activities complained of breached Articles 101 and 102 TFEU, though such has not been proceeded with. Furthermore, in their submissions West Wood has added on as part of its complaint that the leisure facilities of the Respondent are exempt from rates, whereas West Wood's are not. Whilst not to the forefront of any oral argument, it runs right through their submission on Question No. 3. This I will return to later in the judgment.
5. In any event, the Plaintiff argued successfully in the Circuit Court that that court had no jurisdiction to entertain the ‘State Aid' defence. This jurisdictional ruling was appealed to the High Court. By judgment dated the 17th December, 2015, O'Malley J indicated that in her view the Circuit Court does have jurisdiction to determine whether the rates amount to State Aid. However, she referred this matter, together with two other questions set out at para. 6, infra , to the Court of Appeal for its opinion via a consultative case stated. The judgment of the Court of Appeal was delivered by Hogan J on the 25th July, 2017. It is that judgment which is now under appeal to this Court.
Issues
6. The parties were agreed that this case raises points of general public importance suitable for determination by this Court. By Determination dated the 30th April, 2018 ([2018] IESCDET 63), this Court granted leave to appeal in respect of the following three issues:
(i) Does the Circuit Court have jurisdiction, in proceedings issued for the purpose of the recovery of rates, to determine whether the collection and expenditure of the proceeds thereof amounts to State Aid which should have been notified to the European Commission pursuant to Articles 107 - 109 of the Treaty on the Functioning of the European Union?
(ii) Is the issue raised by the defendant, as a matter of law, a challenge to the validity of the rate itself and thus a matter to be dealt with by way of judicial review only?
(iii) If the Circuit Court has jurisdiction in such proceedings, and were to hold that the plaintiff is entitled to judgment for the amount of the rates unpaid but also that the collection of the rates in the circumstances amounts to a State Aid which has not been notified to the European Commission, would it have jurisdiction to award to the defendant damages in an amount equal to the amount of the judgment granted to the plaintiff or in any amount in order to ameliorate the effect of the ( ex hypothesi ) unlawful actions of the plaintiff?
These are the same questions as were referred by the High Court to the Court of Appeal. The answers given by the Court of Appeal are set out at para. 26, infra .
7. West Wood suggests the following answers to the questions posed: Question 1 - Yes; Question 2 - No; Question 3 - Yes. The Council submits that the answer to Question 1 should be an unqualified ‘No' and that the answer to Question 2 should be ‘Yes'. The Council is of the view that it would be premature to seek to answer the third question at this stage of the proceedings.
8. It must be stressed at this juncture that this judgment is concerned only with these three issues. It is not my intention to address the substantive law in relation to State Aid save to the extent that some reference to same may be required by the questions on which leave to appeal has been granted. Accordingly, I will make no comments on the merits of that defence in the context of this case, or on the potential difficulties that may face a defendant in seeking to establish all of the constituent elements of the State Aid defence in circumstances such as these.
9. In order to fully appreciate the context in which these issues have arisen, it is necessary, before turning to the discussion and resolution of these matters, to set out in some more detail the background to these proceedings.
Procedural History
The Underlying Factual Background and the Judgment of the Circuit Court
10. The Plaintiff's claim is for unpaid rates in respect of the years 2011, 2012 and 2013. To this end it has brought three sets of proceedings pursuant to the provisions of the Poor Relief (Ireland) Act 1838. Section 71 of that Act imposes a duty on an occupier of rateable property to pay the rates. Section 73 grants the power to recover arrears of rates; section 78 provides for recovery by civil bill. There is also provision for appealing the rate, which West Wood has never availed of. The Council claims the sums of €176,800 for both 2011 and 2012 and €173,264 for 2013. While such sums would normally be outside the jurisdiction of the Circuit Court, that court enjoys unlimited jurisdiction in rates recovery cases by virtue of section 22(3) of the Courts (Supplemental Provisions) Act 1961 and the Fourth Schedule, Reference Number 3 thereof. It is accepted by all that no direct challenge ( e.g . by way of judicial review) has ever been brought by West Wood to the setting of the rate by the Plaintiff in respect of the years in question.
11. West Wood raised a wide range of issues in its Defence. Of relevance to the present appeal is its contention that the Plaintiff and the companies through which it engages in sports and leisure facilities are "undertakings" within the meaning of European Competition and State Aid law and that the Plaintiff has treated West Wood's premises differently to its own. To this end it was pleaded that the Council is acting in breach of, inter alia , Articles 107 - 109 TFEU. As summarised by O'Malley J in the High Court:
"9. It is pleaded that receipt by the plaintiff of commercial rates, Government grants and money from the Local Government Fund distorts or threatens to distort the market, affecting trade between member states and thereby amounting to unlawful State aid. It is specifically pleaded that the monies collected in respect of rates are disbursed by the plaintiff in support of its own leisure facilities, which are in direct competition with those of the defendant. The defendant also alleges that the plaintiff's facilities enjoy relief from tax.
10. Complaint is made that the alleged State aid has not been notified to the European Commission, as required by Article 108 TFEU.
11. The defendant pleads that the prohibition on State Aid has direct effect, and that national courts are thereby obliged to provide whatever remedies are appropriate in the circumstances. The Circuit Court is also a ‘Competition Authority' within the meaning of the Modernisation Regulation, and has obligations in that role. In this case, the appropriate remedy would be relief from the rates liability and/or damages at least equal to the rates to be collected."
12. The Plaintiff raised a preliminary objection in the Circuit Court, submitting that that court does not have jurisdiction to entertain these issues as set out in the Defence and Counterclaim. The Council framed its objection as follows in its written submissions to the Circuit Court:
"The Plaintiff submits that this Honourable Court does not have the Jurisdiction to hear, determine or adjudicate on matters of European or Domestic Competition law, whether the plaintiff is an undertaking for the purpose of European competition and/or State Aid law, whether commercial rates payable to the Plaintiff are State Aid or Unlawful State Aid, whether the Plaintiff is in a Dominant position in the market, issues which affect trade between member states; and whether the Plaintiff is in breach of or acting contrary to Article(s) 4, 102, 106, 107 - 109 of the Treaty on the Functioning of the European Union (TFEU) as alleged by the defence and counterclaim…"
13. The Council submitted that in reality the issues raised in the Defence were matters of competition law which should properly be dealt with before the High Court and that the European Commission is the body conferred with exclusive authority to determine what is, and what is not, State Aid. It was said that any challenge to the rates ought to have been by way of judicial review.
14. This issue was heard by the Circuit Court on the 24th July, 2014. Having heard submissions on the issue, Her Honour Judge Linnane ruled in favour of the Council. The order of the court recites that the learned Circuit Judge had "no jurisdiction to consider the points raised regarding State aid in the defendant's defence".
The Judgment of the High Court
15. The Defendant appealed the ruling of the Circuit Court to the High Court. A comprehensive written judgment was delivered by O'Malley J on the 17th December, 2015 ([2015] IEHC 800). In her judgment O'Malley quoted from various paragraphs of the Handbook on the Enforcement of EU State Aid Law by National Courts , published by the European Commission in 2010. If I may be forgiven for the lengthy quotation, the learned judge stated as follows in the operative part of her judgment:
"65. It seems to me that in principle, any party defending a claim in civil proceedings is entitled to put in issue the lawfulness of the plaintiff's claim, whether that involves asserting that the claim is not made in a lawful manner, or that the monies claimed or other reliefs sought are not lawfully due or cannot lawfully be granted. That proposition is of course subject to certain limitations. Thus, for example, it would not be open to a defendant in a rates collection case in the District or Circuit Court to argue that the rate had not been validly made. Those courts do not, as a matter of national law, have jurisdiction to determine that issue. However, a defendant who says that the specific claim brought against them amounts to a breach of their rights must be entitled to make that case.
66. If this is correct, the entitlement to make the case cannot depend upon the forum in which the plaintiff brings the claim. The issue is not, therefore, whether the defendant has chosen the correct forum in which to raise the argument. It is whether or not the making of an order against it would be a breach of its rights.
67. A defendant would be entitled to rely upon Constitutional principles or upon national legislation, if applicable, to defeat a claim of any nature made against it in any forum. Having regard to the authorities, the right to invoke the protection of EU law cannot be made subject to more restrictive rules, and the defendant cannot be compelled to institute separate proceedings to vindicate any applicable rights. The defendant is, therefore, entitled to make the argument that the rates sought to be collected from it are a species of unlawful State aid which affects its interests.
68. Having said that, my view would be that the authorities summarised above establish that the following principles apply to such a case:
a. The Circuit Court has jurisdiction to determine whether the rates amount to State aid.
b. The Circuit Court does not, however, have jurisdiction to determine the compatibility of the aid (if it is found to be such) with the internal market.
c. As a matter of fact, it seems to be common case that if it is State aid, it has not been notified to the Commission and to that extent a finding of a breach of Article 108(3) of the Treaty would follow.
d. However, the court must bear in mind that where the issue relates to the payment of a tax, the obligation to notify the Commission can only be relied upon by the taxpayer if their own tax payment forms an integral part of the unlawful aid.
e. If the exemption of the plaintiff's own enterprises is established, and was unlawful, it is not a remedy for that particular illegality to grant exemption to the defendant - that would only compound the breach of the rules.
f. Separate considerations seem to apply to the counterclaim as framed in these proceedings. EU law does not require that damages be available as against the recipient of unlawful State aid. Therefore the question of damages is governed by national law, including national rules as to the monetary jurisdiction of different courts. It may be that the counterclaim could, at least to some extent, be described as being against the plaintiff in its capacity as collector of the rates rather than as recipient, but the defendant has not particularised its general claim that the rates, combined with other State funding, amount to State aid. The obligation on national courts to provide a remedy for a breach of EU law does not, it seems to me, extend to breaching national procedural rules (here, rules relating to jurisdiction) where that is not necessary under the principles of equivalence and effectiveness.
g. The defendant's claim exceeds the jurisdiction of the Circuit Court in relation to damages. While an argument may be open that under national rules the monetary limit does not apply to a counterclaim, this issue was not addressed before me and I am proceeding on the basis that, in the normal course of events, the limit does apply. My view, therefore, would be that the Circuit Court does not have jurisdiction to entertain the counterclaim."
16. O'Malley J then indicated that she was prepared in principle to allow the appeal and to remit the matter for hearing by the Circuit Court in light of her judgment. However, having regard to the fact that the matter came before her by way of a Circuit Appeal, from which no further appeal lies, she stated that she was prepared, if either or both parties desired it, to refer a consultative case stated to the Court of Appeal. In so stating she was acknowledging that it may be considered undesirable for the High Court to make a final determination of legal issues of such significance for local authorities and rate-payers alike. The parties subsequently did request such a case stated, albeit on different issues, and so the learned judge referred the questions set out at para. 6, supra , to the Court of Appeal.
The Judgment of the Court of Appeal
17. The judgment of the Court of Appeal was delivered by Hogan J (Peart and Hanna JJ concurring) on the 25th June, 2017. In the learned judge's view, it was clear that the Circuit Court does not have jurisdiction to pronounce, whether directly or indirectly, on the validity of the rate struck by the Council as such, as that Court does not enjoy a judicial review jurisdiction. It can, at most, pronounce indirectly on the issue if it is raised by way of defence, but such ruling would be personal to the defendant and would not have erga omnes effect as if the rate were quashed by certiorari or a declaration to that effect was granted by the High Court (para. 6). In its written submissions to this Court, West Wood has submitted that this is a correct statement of the law and that this in fact disposes of the second issue before the Court.
18. Hogan J then referred to the judgment of this Court in Dublin City Council v. Williams [2010] 1 IR 801 (" Williams "), where it was held that the legality of a fixed charge for refuse could not be raised in the District Court by way of a defence to a civil claim for payment for these charges. In Williams , Geoghegan J distinguished the earlier Supreme Court judgment in Athlone UDC v. Gavin [1985] I.R. 434 (" Gavin ") on the basis that Gavin was a case where there was a clear error on the face of the proceedings which it was open to the defendant to raise; there was no uncertainty as to its illegality. In the view of Geoghegan J, such did not pertain to Williams' case. He stated that in reality Mr Williams was seeking to have the District Court carry out an elaborate investigation of the proportionality applied by the Council in achieving a polluter pays principle in their waste collection policy, a matter that could not possibly be raised by way of defence in a civil claim in the District Court, albeit one that could properly be litigated by way of an appropriate declaratory action or judicial review.
19. Hogan J then referred to the decision of the House of Lords in O'Reilly v. Mackman [1983] 2 AC 237, where it was held that the procedural requirements of judicial review in the neighbouring jurisdiction could not be bypassed by resorting to an ordinary plenary action for declaratory relief; such amounted to an abuse of process. This principle has never been adopted in this jurisdiction, save where statute prescribes it (see O'Donnell v. Corporation of Dún Laoghaire [1991] 1 I.L.R.M. 301, where it was held by Costello J that a plaintiff may challenge the validity of an administrative decision by way of plenary summons, provided that the corresponding provisions of the judicial review procedure provided for by Order 84 RSC are applied by analogy).
20. The learned judge observed that West Wood could have challenged the rate by way of plenary summons in the High Court, provided that the proceedings complied by analogy with Order 84. In his view, however, such was a different thing from saying that the validity of an administrative decision can be raised by way of defence to debt recovery proceedings in the District or Circuit Court: such is permissible only where there is "patent illegality" in respect of the charge which is sought to be recovered.
21. Hogan J referred to the post- Mackman decision of the House of Lords in Wandsworth LBC v. Winder [1985] AC 461 (" Winder "). The defendant tenant was sued for unpaid rent in the County Court by the Council. He sought to raise as a defence an argument that the Council's resolutions to invoke their statutory powers to raise the rent were unreasonable and unlawful. The House of Lords held, in effect, that it could not be regarded as an abuse of process for the defendant to litigate this point since he had not selected the forum (he it was who was being sued by the Council) and that the right to litigate the legality of an administrative decision by way of defence could only be excluded by statute, which had not occurred in that instance.
22. Clarke J, as he then was, commented on Winder in his judgment in Shell E & P Ireland v. McGrath [2013] 1 IR 247, though on the facts of the case he was not required to take a view on the application of that line of jurisprudence in this jurisdiction. In any event, he observed that such line of authority could have no application which would defeat the underlying rationale adopted by this Court in O'Donnell : a party cannot circumvent the judicial review requirements by commencing plenary proceedings or mounting a counterclaim in such proceedings. He left over to a later case the issue of what would happen where a defendant is sued on the basis of a measure which he wishes to challenge.
23. Returning to the present case, Hogan J observed at para. 25 of his judgment that he found it "difficult to see how the principle in Winder could properly be applied in this jurisdiction in view of the Supreme Court's decisions in Williams and Shell ." In both Winder and Williams the defendant wished to resist a debt recovery claim by challenging the proportionality of the measures in question; Winder was permitted to do so, but Williams was not. Moreover, the former involved the exercise of private law powers by the local authority acting in its capacity as landlord, whereas this was not the situation in the latter case or, indeed, in the present matter between the Council and West Wood. He further found it clear from the line of authority stretching from O'Donnell through Shell that a defendant cannot circumvent the time limits of Order 84 by impeaching the validity of an administrative decision by way of a defence or a counterclaim.
24. He continued by stating that "it may be said that our administrative law does not, generally speaking at least, recognise the form of plea of illegality which is common to civilian systems of administrative law whereby a defendant can resist the enforcement of an (otherwise valid) administrative decision on the basis that it is inapplicable to him or her and on the same grounds as if the validity of that decision were to have been directly challenged in appropriate proceedings in the first place." Insofar as a plea of illegality is recognised by our administrative law, such can be set up by defence only where there is a clear error on the face of the proceedings or there is no doubt about the illegality of the decision. As a consequence, where the defence involves a complex evaluation of competing considerations - such as the proportionality of the waste charges by reference to the polluter pays principle in Williams - then such issue may not be raised by way of defence.
25. Having set out the applicable case law, Hogan J said as follows in respect of the application of the Williams principles to the present case:
"30. Applying these Williams principles to the facts of the present case, it can be said that the Circuit Court has a jurisdiction to entertain a defence that the claim for rates involves a form of unlawful State aid contrary to Article 107(1) TFEU if that Court is satisfied that the proceedings involve a clear error on the face of the proceedings or there is no doubt as to the illegality of the decision. In the latter context, this does not mean that the Circuit Court could only exercise this jurisdiction where the illegality had been conceded or where it was manifest to the point of obviousness. The jurisdiction could nonetheless be exercised - as in Gavin - where the illegality was established following legal argument upon agreed or otherwise undisputed facts.
31. These exceptions aside, however, it is unlikely that the Circuit Court has jurisdiction to go much further, since if, for example, the defence was to be based on complex expert evidence or upon some proportionality analysis, this would be a clear example of a defence straying well beyond establishing a clear illegality in the Williams sense.
32. These are all matters for the Circuit Court ultimately to assess. In these circumstances, I think it would at present be both premature and unnecessary to consider the third question posed in the case stated."
26. The learned judge therefore concluded as follows in respect of the questions referred to the Court by O'Malley J:
"Question 1: Yes, but only where the defence raises an issue which involves a clear error on the face of the proceedings or there is no doubt as to the illegality of the decision in the sense explained and described by the Supreme Court in Dublin City Council v. Williams [2010] 1 I.R. 810. The time limits prescribed by Ord. 84 also apply by analogy to any such defence or counter-claim, save that, where necessary, consideration should be given to an extension of time where the defendant establishes that it only had a real interest in the matter from the date the plaintiff commenced the present proceedings.
Question 2: No. The Circuit Court enjoys no jurisdiction to pronounce upon the general validity of the rate struck by a rating authority. While it may nonetheless entertain a defence in the limited circumstances indicated in the answer to Question 1, any such defence is, even if successfully established, personal to that defendant and does not involve any general ruling as to the validity of the rate.
Question 3: In view of the answers just given to Question 1 and Question 2, it would be premature and unnecessary to answer this question."
27. As can sometimes happen, however, this was a conclusion which ultimately satisfied neither party. West Wood was of the view that the Court of Appeal had confused and elided Questions 1 and 2 and that its analysis was not directed to the true issues in the case. For the Appellant, the answer to Question 1 should be an unqualified "Yes". It further says that the Court of Appeal's answer to the second question suggests that it understood that question as asking whether the Circuit Court has jurisdiction to pronounce upon the general validity of the rate struck by a rating authority (and notes that its answer of "No" is in fact quite unsurprising in the context of that particular question); however, what Question 2 in fact asks is whether the attempt to rely upon EU law by way of defence and the consequent invitation to the Circuit Court not to make the decree sought in itself amount to a challenge to the validity of the rate struck. The Appellant submits that this question was not answered, and that the answer should be "No".
28. The Council, for its part, contends that despite the qualified nature of its answer to Question 1, the Court of Appeal nonetheless went too far and that the answer to that question should be "No". It says that the Court of Appeal diluted its answer unnecessarily to such a degree as to leave uncertainty. Furthermore, the Respondent says that the attempt to rely on State Aid by way of defence is, as a matter of law, a challenge to the validity of the rate itself, and consequently that the answer to that question ought to have been "Yes".
29. Accordingly, albeit that they are coming at it from very opposing viewpoints, both parties were satisfied that the questions should be addressed on a further appeal. Thus the matters came before this Court.
Submissions
30. The Court was assisted by able written and oral submissions on behalf of both parties, for which it is grateful to counsel. The substance of the arguments raised is addressed in the "Discussion/Decision" section of this judgment, below. What follows next is a brief summary of the submissions made on behalf of both parties.
Submissions of the Appellant
31. In respect of the first question, the Appellant refers to section 22(3) and (6) of the Courts (Supplemental Provisions) Act 1961 ("the 1961 Act") and says that there is no reason, as a matter of statutory interpretation of the Circuit Court's jurisdiction, why a defendant cannot raise any defence it chooses to a claim brought against it in the Circuit Court to the same extent that it could in the High Court. West Wood submits that as that court has unlimited jurisdiction to grant a decree in the amount sought by the Plaintiff, it must follow that it has jurisdiction to grant or decline to grant such a decree and, if appropriate, to dismiss proceedings brought for this purpose.
32. The Appellant refers to the primacy of EU law and to the law in relation to State Aid; in particular, it refers to the law and commentary in respect of Articles 107 and 108 TFEU, though I do not intend to dwell on those matters here. Per Article 108(3), any new State Aids must be notified to the Commission before the Aid comes into operation; it is submitted that this provision has direct effect.
33. West Wood stresses the importance of the TFEU's competition provisions and submits that the Circuit Court is as much bound to vindicate the Appellant's rights under EU law as is this Court, and the former must therefore nullify as far as it can the adverse effect of the State Aid. Whether or not the Circuit Court should decline to enforce an unlawful State Aid is not a question which depends in any way on what are, as a matter of national law and procedure, the jurisdictional limits of that court. The Circuit Court is an organ of State and as such is obliged to give effect to EU law. Even where there is a conflict between EU law and Constitution, the former takes precedence. The Appellant refers to the necessity for national courts to give remedies for individuals who are adversely affected by a breach of EU law rules having direct effect (Case C-213/89 Factortame I ; Cases C-6/90 and C-9/90 Francovich v. Italy (1991) ECR-5357) and says that national rules which may stand in the way of such remedies must be set aside.
34. The Appellant refers to Bellamy and Child, European Community Law of Competition (6th Ed., Roth (ed.), 2008), where it is said that the case law of the CJEU establishes that national courts are obliged to order recovery of aid which has been granted in contravention of the requirements of Article 108(3), although they do not have jurisdiction themselves to declare aids to be compatible with the common market. According to the authors, the latter role is the exclusive preserve of the Commission, whereas national courts have the duty to protect the rights of individuals in cases where there has been a breach of that Article and thus they must provide remedies for a failure to notify a new State Aid. Such remedies may include the repayment of aids illegally granted and also the possibility of damages against the national administration.
35. West Wood also refers to the Commission's 2010 Guidance Note entitled Enforcement of EU State Aid Law by National Courts , where it is said at para. 8 that the first issue facing national courts is whether the measure concerned actually constitutes State Aid. It is said that the Respondent is therefore entirely wrong to say that the Commission is the exclusive forum for determining what is, and what is not, State Aid. The Appellant acknowledges that once a national court determines that the matter in question is a State Aid, it has no jurisdiction to decide its compatibility with the Treaty. However, once such court decides that such State Aid has not been notified to the Commission, the Aid is conclusively determined to be illegal and the national court is obliged to devise and give whatever remedy is necessary to nullify the effect of the breach. Ultimately, it is said that there is no reason in logic or law as to why the Circuit Court should not adjudicate on the EU law arguments where EU law is as much a part of our national law as any other part of it and, indeed, enjoys supremacy over it. Thus that court has full jurisdiction to entertain the State Aid claim and accordingly to dismiss the Council's action.
36. As regards the second issue, the Appellant says that even if this was a challenge to the validity of the rate, it does not follow that it would have to be dealt with by way of judicial review ( O'Donnell ). More fundamentally, however, West Wood submits that the defence raised does not involve a challenge to the validity of the rate itself. The Appellant agrees with the Court of Appeal that its defence, if successful, would be personal to it, and would not involve a general ruling as to the validity of the rate. In any event, submits West Wood, it is not saying that the mere collection of rates it, in itself, unlawful or invalid: it is the collection of rates allied to the purpose for which it is intended to spend them ( i.e . on the Council's leisure centres) which constitutes State Aid. If this is a State Aid then it was never notified to the Commission and is conclusively illegal. West Wood suggests that its point is illustrated when one considers what would happen if the Council did not spend any of the proceeds of the rates on subsidising its leisure centres: the fixing of the rate would remain just as valid, but West Wood could no longer rely on the State Aid defence.
37. In the Appellant's view, such is sufficient to dispose of Question Two, but it goes on to address Williams, Shell, Winder etc . in the context of the argument that raising this defence is in some way an impermissible collateral attack on the validity of the rate. The Mackman "exclusivity principle" has never applied in Irish law and it is said that English law has since moved much closer to the Irish position in any event by developing such a wide range of exceptions to that principle that now the real question in UK law is whether bringing the claim otherwise than by judicial review is an abuse of process.
38. Referring to Winder , the Appellant says that it stands for the proposition that from its inception the exclusivity principle did not catch the situation where a defendant simply seeks to defend proceedings brought against him by a public authority by putting forward a defence which involves a challenge to the decision of the public authority which founds the claim against him. This decision has been cited and applied repeatedly since 1984. In this regard the Appellant quotes at length from paras. 22-28 of the decision of the UK Court of Appeal in Davies v. Hertfordshire County Council [2018] EWCA Civ 379, tracing this line of authority and holding that a defendant could raise a defence under Article 8 ECHR to a claim based on a Notice to Quit in a County Court.
39. The Appellant submits that while the Court of Appeal took the view that Williams and Shell rule out the application of Winder in this jurisdiction, neither case decided the issue. In fact, Shell expressly confirmed that the point remains open (para. 54). It is submitted that the fact that Winder was a private law claim does not affect the fundamental principle as to the ability of a defendant to raise a defence in public law proceedings. Finally on this point, the Appellant says that if it cannot raise the State Aid point in its Defence, it is obliged to take separate proceedings to vindicate and protect its rights under Community law, putting it at a significant procedural disadvantage and placing it in a different position to a defendant raising a defence under national law, in breach of the principles of effectiveness and equivalence. If it cannot raise the point in the Circuit Court, it must either suffer a decree and then appeal to the High Court, or institute separate concurrent proceedings in that court. It says that it would then run the risk of running afoul of the decision in Henderson v. Henderson (1843) 3 Hare 100.
40. Regarding the third issue, the Appellant submits that in most cases the repayment of the Aid will be the appropriate remedy, but says that this will not always necessarily be so: for example, where Aid has been financed by charges imposed on undertakings, the national court may have to order restitution of those charges. Here, it is said that the rates make a substantial contribution to the income out of which the Council finances its leisure centres. The Appellant submits that the appropriate remedy would be for the Court to order restitution of the rates levied on West Wood and/or to annul the imposition of the rates the subject of these proceedings. The Appellant refers in this regard to Ferring v. ACOSS (2001) ECR I-9067 and the Opinion of Advocate General Jacobs in Case C-126/01 GEMO (30th April, 2002). In the latter Opinion it was said that a national court which wishes under its national law to order the refund of charges collected on the basis of a law adopted in violation of Article 107(3) furthers the effectiveness of community law.
41. Thus it is said that if the Circuit Court is satisfied that there is a State Aid to the Council which has not been notified to the Commission, such State Aid is unlawful and the most appropriate remedy is the cancellation of the rates. The Appellant submits that the Circuit Court would be not only entitled, but obliged, to give such remedy.
42. As to its claim for damages, the Appellant says that this is inserted only so as to allow the Court, if it felt obliged to grant a decree for the amount sought by the Council due to the formal proofs being in order, to in turn award damages to the Appellant in the same amount as the decree so as to "nullify the unlawful consequences of a breach of Community law." There is no claim for damages in this case independent from the requirement on the Court to "devise" a remedy to nullify the effects of the unlawful State Aid and it is submitted that the more appropriate remedy in this case would simply be a dismissal of the Council's claim for rates. However, it is further submitted in the alternative that the Circuit Court does have jurisdiction pursuant to Order 15(7) of the Circuit Court Rules to make an award of damages in the same amount as any decree for rates, notwithstanding that it might be in an amount above the usual monetary limit in that Court. It is therefore submitted that the monetary limitation on the Circuit Court's jurisdiction does not apply to the counterclaim in this case, and could not in any event operate to deprive the Appellant of the means to vindicate its rights under EU law.
43. The Appellant also filed supplemental submissions in relation to the issue of a possible reference by this Court to the Court of Justice of the European Union.
Submissions of the Respondent
44. On the first issue, the Council disputes the Appellant's interpretation of section 22(6) of the 1961 Act; the important words of that provision are the words "within its jurisdiction", and the Circuit Court does not have jurisdiction to decide on a judicial review matter. It is further said by the Respondent that the vindication of a European point in Ireland is subject to the procedural and jurisdictional limits applicable in the Irish legal order. The Respondent relies on Arklow Holidays v. An Board Pleanala [2012] 2 I.R. 99, Minister for Justice v. Equality Tribunal [2009] IEHC 72, Martin v. An Bord Pleanala [2002] I.R. 655 and O'Neill v. Ryan [1990] 2 I.R. 200, which adopt and apply the decision in Rewe-Handelsgesellschaft Nord mbH and Rewe-Markt Steffen v. Hauptzollamt Kiel (Case 158/80) [1981] ECR 1805. The Council submits that there is no overarching general right to assert a European right in any Irish court, ignoring the procedural and jurisdictional limits applicable in the Irish legal order.
45. It is said that in making the rates in question, the Council was carrying out a public law function pursuant to section 61 of the Poor Relief (Ireland) Act 1838. The Council points out that West Wood has never appealed the rate. Neither has it judicially reviewed the making of the rate. As the decisions of the Respondent stand unchallenged, they are lawful and enforceable public law decisions which can be challenged only by way of judicial review. The Council submits that in seeking to challenge the collection of the rate, the Appellant is in reality challenging the right of the Council to make the rate. The Appellant says that the Respondent is acting illegally but the Circuit Court does not have jurisdiction to hear the plea that the acts of the Respondent were unlawful.
46. As to the second issue, the Council reiterates that the claim made by the Appellant calls into question the Respondent's vires. It is a challenge to the basis on which the rate is collected and, thus, to the way it is made: it is a collateral attack on the rate itself. The Appellant was obliged to take any such challenge by way of judicial review.
47. While West Wood has relied on Winder , the Respondent says that it is not applicable to the facts and circumstances of this case per para. 53 of Shell v. McGrath , as the Appellant cannot circumvent the judicial review time limits by raising the defence out of time. As to the matters identified at para. 54 of that judgment, the Council says that it is inconceivable that the Appellant would not have had a real interest at the time of the making of the rate, and points out that public notice of the rate is given and a bill is sent to the rate payer demanding payment. Winder , moreover, was a private dispute between landlord and tenant, whereas this is a public law action. As stated by Clarke J in Rosborough v. Cork County Council [2008] 4 IR 572, there are significant differences in the principles governing the relationship between parties depending on whether their relations are governed by contract or by statute and public law. It is said that the Appellant has not confronted this point in its attempt to apply the Winder principle to public law litigation. The Council further relies on the judgment of Geoghegan J in Williams.
48. The Respondent submits that the third issue will not arise unless it has been determined, following a full hearing of the evidence, that the impugned conduct of the Council gives rise to anti-competitive behaviour (it being assumed for the purposes of the third question that the Circuit Court does have jurisdiction to determine the State Aid point). Only after the resolution of that issue might the question arise as to the appropriate form of penalty, be that by way of damages, set off or otherwise. It is said that how and what penalty should be imposed would be a matter for argument having heard all of the evidence.
49. Finally, as regards the possibility of a reference to the CJEU, the Council submits that there is clarity in the legal position that any right to assert a point of EU law is subject to the procedural and jurisdictional limits applicable in the Irish legal order, subject to the principles of effectiveness and equivalence. It is said that this Court does not require the assistance of the CJEU to arrive at this conclusion and thus no reference is needed.
Discussion/Decision
Question No. 1:
50. The parties are in agreement as to many basic propositions. European Union law has primacy over national law. The requirement for State Aid control comes from a need to maintain competition in the Single European Market. The concept of "Aid" in this sense is wide and goes beyond a mere subsidy (see Case 30/59 Steenkolenmojnen v. High Authority (1961) ECR 1, a case under the ECSC Treaty), though certain forms of Aid are nonetheless deemed compatible with the internal market. It is for the Commission to decide whether State Aid distorts competition in the Single Market. Moreover, it is of course agreed that national courts have a duty to enforce and give effect to directly applicable provisions of the Treaty. Indeed, these underlying assumptions are so fundamental as to scarcely require restatement.
51. The Council submits that there is no overarching general right to assert a European right in any Irish court, ignoring procedural and jurisdictional limits applicable in the Irish legal order. However, and leaving to one side for a moment the objection that West Wood is effectively asking the Circuit Court to exercise a judicial review jurisdiction, it is not apparent precisely what procedural or jurisdictional limit is said to prohibit the Circuit Court from considering the EU law point raised by the Appellant.
52. To my mind there is no doubt that the Circuit Court, as an organ of the State, is obliged to give effect to European Union law. The supremacy of EU law over national law is well-established. As stated by Hogan, Whyte, Kenny and Walsh in Kelly: The Irish Constitution (5th Ed., Bloomsbury Professional, Dublin, 2018) at para. [5.3.96] under the heading " Supremacy of European Union law ":
"Save for one isolated and inconclusive instance dealing with abortion, the Irish courts have unhesitatingly acknowledged the supremacy of Union law. In addition, the case law shows that the Irish courts have adopted Marleasing principles to ensure that national law is interpreted in a manner compatible with Union law, even where this may mean that some occasional violence is done to national legislation. There are, however, some limits to this approach, as the courts will not interpret national law in a manner which is contra legem ." [Internal footnotes omitted]
53. The authors refer to the judgment of Keane J, as he then was, in Murphy v Bord Telecom Éireann [1989] I.L.R.M. 53 as a good illustration of the Marleasing principle. The issue was whether the Anti-Discrimination (Pay) Act 1974 applied to a situation where female workers performed work of greater value than that performed by their male colleagues, but where they were actually paid less. Although Keane J originally held that it did not apply, the Court of Justice ruled following a reference that such a result would be incompatible with the equal pay provisions of Article 119 of the EEC Treaty (subsequently embodied in Article 141 TEC, and now in Article 157 TFEU). Thus the Irish courts were now required to interpret the 1974 Act in the manner required by Article 119, even if this meant departing from an earlier judicial ruling authoritatively interpreting the 1974 Act in a different fashion:
"4. The interpretation of the relevant sections of the Act of 1974 is exclusively a matter for the Irish courts.
5. The interpretation of those sections, in accordance with the canons of construction normally applied in Irish courts, has in the present case yielded a result which is in conflict with Article 119 of the Treaty as interpreted by the Court of Justice of the EC.
6. Where such a conflict exists, national law must yield primacy to community law: Crotty v An Taoiseach [1987] ILRM 400. The exclusive role of the making of laws assigned to the Oireachtas by Article 15 of the Constitution has been expressly modified by Article 29.4.3° so as to enable community law to have the force of law in the State.
7. Where such a conflict arises, the national law is, accordingly, inapplicable. In the words of the Court of Justice of the EC in Amminstrazione della Finanze dello Stato v. Simmenthal [1978] ECR 629, 644:
‘every national court must, in a case within its jurisdiction, apply community law in its entirety and protect rights which the latter confers on individuals and must accordingly set aside any provision of national law which may conflict with it, whether prior or subsequent to the community rule'."
54. Moreover, referring to the unavoidable conflicts which may sometimes arise as between national law and EU law, Hogan, Whyte et al state as follows at para. [5.3.100]:
"The potential for conflict between the precepts of Union law on the one hand and the Constitution on the other is a real one which may yet present difficulties for the Irish courts. The conventional view is, of course, that where there is a conflict between the provisions of the Constitution and Union law itself, the latter takes precedence by virtue of the doctrine of supremacy which has just been discussed. This is not only the view of the Court of Justice, but has also been emphatically endorsed by the High Court, Court of Appeal and the Supreme Court." [Internal footnotes omitted]
55. The first question posed for this Court asks whether the Circuit Court has jurisdiction in these proceedings to determine whether the collection of rates and expenditure of the proceeds thereof amounts to State Aid which should have been notified to the Commission pursuant to Articles 107-109 TFEU. The Council no longer maintains the argument on this appeal that issues of State Aid and what amounts to such are matters exclusively within the remit of the Commission and are ultra vires the national courts. In any event I think it is quite clear that this is not the position.
56. The Commission Notice on the Enforcement of State Aid Law by National Courts (Official Journal of the European Union, 2009/C 85/01, 9.4.2009) has this to say in respect of the role of national courts in State Aid enforcement:
The latter proposition is well-established by case law. In Case 78/76 Steinike & Weinlig [1977] ECR 595, the Court stated as follows at paragraph 14:
"14. The limitations mentioned above on reliance on Article 92 do not however mean that cases cannot come before national courts requiring them to interpret (making use if necessary of the procedure under Article 177 of the Treaty) and apply the provisions contained in Article 92, but nevertheless they cannot be called upon to find that such state aid is incompatible save in the case of aid introduced contrary to Article 93(3). Thus a national court may have cause to interpret and apply the concept of aid contained in Article 92 in order to determine whether state aid introduced without observance of the preliminary examination procedure provided for in Article 93(3) ought to have been subject to this procedure."
Similarly, in Case C-39/94 SFEI and Others [1996] ECR I-3547, the Court held as follows at paragraph 49:
"49 Finally, a national court may have cause to interpret the concept of aid contained in Article 92 of the Treaty in order to determine whether a State measure introduced without observance of the preliminary examination procedure provided for in Article 93(3) ought to have been subject to that procedure …"
If a further citation were required, the Court again made the same point in Case C-354/90 Fédération Nationale du Commerce Extérieur des Produits Alimentaires and Others v France [1991] ECR I-5505 ("FNCE") where it said at paragraph 10:
"As far as the role of national courts is concerned, the Court held in [ Steinike & Weinlig ] that proceedings may be commenced before national courts requiring those courts to interpret and apply the concept of aid contained in Article 92 in order to determine whether State aid introduced without observance of the preliminary examination procedure provided for in Article 93(3) ought to have been subject to this procedure."
See also Case C-368/04 Transalpine Ölleitung in Österreich [2006] ECR I-9957 (" Transalpine Ölleitung in Österreich ") at paragraph 39.
57. Article 108(3) TFEU (formerly Article 88(3) TEC) provides that:
"The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid. If it considers that any such plan is not compatible with the internal market having regard to Article 107, it shall without delay initiate the procedure provided for in paragraph 2. The Member State concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision."
58. The Commission Notice on the Enforcement of State Aid Law by National Courts refers to this as the "standstill obligation". At section 2.2 it addresses the role of national courts in enforcing this obligation in the following terms:
"24. Like Articles 81 and 82 EC, the standstill obligation laid down in Article 88(3) of the Treaty gives rise to directly effective individual rights of affected parties (such as the competitors of the beneficiary). These affected parties can enforce their rights by bringing legal action before competent national courts against the granting Member State. Dealing with such legal actions and thus protecting competitor's rights under Article 88(3) of the Treaty is one of the most important roles of national courts in the State aid field.
25. The essential role played by national courts in this context also stems from the fact that the Commission's own powers to protect competitors and other third parties against unlawful aid are limited. Most importantly, as the ECJ held in its ‘ Boussac ' and ‘ Tubemeuse ' judgments, the Commission cannot adopt a final decision ordering recovery merely because the aid was not notified in accordance with Article 88(3) of the Treaty. The Commission must therefore conduct a full compatibility assessment, regardless of whether the standstill obligation has been respected or not. This assessment can be time-consuming and the Commission's powers to issue preliminary recovery injunctions are subject to very strict legal requirements.
26. As a result, actions before national courts offer an important means of redress for competitors and other third parties affected by unlawful State aid. Remedies available before national courts include:
(a) preventing the payment of unlawful aid;
(b) recovery of unlawful aid (regardless of compatibility);
(c) recovery of illegality interest;
(d) damages for competitors and other third parties; and
(e) interim measures against unlawful aid."
It goes on to say as follows in respect of procedural rules and standing before national courts:
"70. National courts are obliged to enforce the standstill obligation and protect the rights of individuals against unlawful State aid. In principle, national procedural rules apply to such proceedings. However, based on general principles of Community law, the application of national law in these circumstances is subject to two essential conditions:
71. Given the supremacy of Community law, national courts must leave national procedural rules unapplied if doing otherwise would violate the principles set out in paragraph 70."
59. Moreover, per FNCE , national courts are obliged to order recovery of State Aid which has been granted in contravention of the requirements of Article 108(3). It is true that the compatibility of the Aid with the internal market is a matter for the Commission, but that is a separate issue.
60. It can therefore be seen that the Treaty provisions which the Appellant seeks to invoke as part of its State Aid defence have direct effect. Individuals may invoke the provisions of Articles 107 and 108(3) against the State. National courts are obliged by EU law to give - including, where necessary, by devising - remedies for individuals who are adversely affected by a breach of these rules. National courts must therefore provide a remedy for a failure to notify a State Aid. There is no reason in law, logic or principle why the Circuit Court should be treated any differently for these purposes.
61. Since the hearing of the within appeal, the Grand Chamber of the CJEU has delivered judgment, on the 4th December, 2018, in Case C-378/17 Minister for Justice and Equality and the Commissioner of An Garda Siochana v. Workplace Relations Commission , which case originated as a reference from this Court. The issue concerned the extent to which a statutory body which is not a court could or is obliged to disapply national legislation that conflicts with EU law. In the course of its judgment, the CJEU stated as follows at paras. 38-39:
I am inclined to agree with West Wood's contention that if this is so even with regard to a non-judicial body, it is difficult to see how that the same duty does not rest on a court, even a court of limited jurisdiction such as the Circuit Court. However, that decision is not truly on point given my view that the issue of State Aid is capable of being raised in the Circuit Court as a defence to the claim made.
62. In my view, therefore, the Circuit Court does have jurisdiction, at least in principle, to consider the State Aid argument. The right to raise this point derives directly from Union law. The principles of supremacy and direct effect compel me to this conclusion. This finding, however, is far from saying that the State Aid point has been established. In fact, I am not even suggesting that a prima facie case has been made out in that regard. Two further points need to be noted in this context: first, even if the underlying assumption as to subsidy is proven, a question still arises as to whether that amounts to State Aid; second, even if it does the follow on issue is, whether that is a defence to the within proceedings. These are matters which entirely remain open for consideration.
63. Accordingly, save for the Council's primary suggestion that the proposed State Aid defence is an attempt to sustain an out-of-time judicial review in the Circuit Court, I do not in principle see any great issue with the Appellant's contention that the Circuit Court is as much bound to vindicate West Wood's rights under EU law as any other court.
Transition: Questions No. 1 and 2 :
64. In arriving at this conclusion, I wish to make it perfectly clear that all I have decided is the jurisdiction point: yes, the Circuit Court can entertain a plea that State Aid may or could be a defence to a rates recovery action before it. I am not to be taken as even implying such is a stateable defence to an action like the present one. Whether it is so stateable, and, if so, what consequences should follow and what impact it might have on what appropriate order might be made on the claim or on any counterclaim, are matters for fuller debate and resolution before the trial court. In short, I am going no further than stating the issue can be raised in the circumstances presenting.
65. At this juncture, I should venture a quick comment on the questions as posed for this Court and the answers that were given in the Court of Appeal. I must agree with the Appellant that - at least on one plausible reading - the Court of Appeal gave an answer to Question 1 which appears to have been premised on the conclusion that the answer to Question 2 is that the State Aid point is, as a matter of law, a challenge to the validity of the rate itself. Moreover, the Court's answer to Question 2 - again on one reading, at least - seems to respond to a different question, one asking whether the Circuit Court enjoys a jurisdiction to pronounce upon the general validity of the rate struck by the Council, which of course it does not. It is not expressly clear what the Court's answer was to Question 2 as posed, though that that can perhaps fairly be inferred from its treatment of Question 1 that it considered that the State Aid defence is a collateral challenge to the validity of the rate. If, however, that Court was incorrect in that regard, then the analysis of Williams, Wilder, Shell etc . which informed its answer to Question 1 was perhaps misplaced, given that those cases concern the circumstances in which the validity of an administrative decision can be raised by way of a defence to debt recovery proceedings in a lower court. The Appellant has maintained throughout this appeal that it is not making any general challenge to the validity of the rate.
66. Perhaps the matter might have been clearer if the questions had been posed in a different order. If the answer to Question 2 is Yes, then Question 1 asks, in effect, whether the Circuit Court has jurisdiction to determine the State Aid matter in circumstances where that defence is a challenge to the validity of the rate itself. Williams and Wilder etc . seem applicable in that context. If, however, the answer to Question 2 is No, then Question 1 asks simply whether there is a jurisdictional barrier to the Circuit Court determining the EU law issue raised. To that extent, therefore, it appears to be prudent first to answer Question 2 so as to be clear as to what is asked by Question 1.
67. The Council says that the Appellant's State Aid point is a challenge to the basis on which the rate is collected, and therefore the basis on which it is made. It is characterised as a collateral attack on the rate itself. This, it is said, is an attack on the vires of the Council. The Council says that such an attack on the rate was obliged to be brought by way of judicial review; since the time limits thereof cannot be circumvented by raising the defence out of time, the Respondent submits that this point of defence is not open to the Appellant.
68. The Appellant, however, characterises its State Aid defence much more narrowly. This defence does not, it says, involve a challenge to the validity of the rate itself. It does not seek to have the rate struck down in a way that would be of general application with consequences for all ratepayers. Moreover, its point is not that the mere collection of rates is, in itself , unlawful: it is the collection of rates combined with the intention to spend those rates subsidising West Wood's competitor, the Council's leisure centres, which is called into question as a State Aid. At one point, as can be seen from the documentation (paras. 4 & 11 above), complaint was also made that the Council's leisure facilities were themselves exempt from rates. This is no longer part of the argument. Accordingly, the case advanced is that as stated. On such a basis, it is said that there is no challenge to the validity of the rate itself.
69. The Appellant submits that the thing that gives rise to the illegality which underpins the defence springs from the purpose for which the proceeds of the rates are applied by the Council, rather than from any inherent invalidity in the striking of the rates. Indeed it is pointed out that the Court of Appeal acknowledged this to an extent when it said in the course of its answer to Question 2 that "such defence is, even if successfully established, personal to that defendant and does not involve any general ruling as to the validity of the rate", albeit that the Appellant disagrees with the manner in which the Court of Appeal circumscribed that defence by holding that it may only be relied upon where there is a clear error on the face of the proceedings or there is no doubt as to the illegality of the decision, per Williams .
70. In so framing the second issue the Appellant is clearly striving to avoid the need to engage directly with the apparent difficulties presented to it by the judgments in Williams and Shell. If forced down that road West Wood will say that this Court should follow the Winder approach, which has never been conclusively ruled out in this jurisdiction, even if it has not been warmly embraced either. Evidently, however, the narrower route is preferable.
71. For my part, I accept the Appellant's submission that its challenge is not to the validity of the fixing of the rate itself, but rather to the combination of the collection of rates from West Wood and the purpose to which part of them are put in subsiding the Council's leisure centres. This is a fine distinction but it is not, in my view, an artificial one. As correctly pointed out by counsel for West Wood, if the Council did not spend any of the proceeds of the rates collected on its own fitness centres, but instead devoted them to its other activities, then there quite clearly could be no State Aid defence open to the Defendant; there would be no relevant State Aid. The substantial challenge is to the utilisation of these rates on subsidising the very activities which are in competition with West Wood; it could not maintain this defence if those rates were devoted solely to maintaining sewers and building roads.
72. The evidence, moreover, supports West Wood's position, at least at this general level. It establishes that the income that the Council derives directly from the centres does not cover the costs of running them: the income generated by the leisure centres amounts to only a small percentage of their running costs. Evidently that shortfall must be made up for from elsewhere within the Council's finances. Indeed, it has never been denied that at least a portion of this shortfall, if not all of it, comes from the rates that are collected by the Council. But at least insofar as the actual defence being put forward is concerned, it is clear that it is not a challenge to the validity of the rate in and of itself. It is not, therefore, a matter which could be dealt with only by way of judicial review (it being clear that if the State Aid defence was a challenge to the validity of the rate, it could only be brought via such an action). Accordingly, the answer to Question 2 is that the issue raised by the Appellant is not, as a matter of law, a challenge to the validity of the rate itself. It follows that if the defence is successfully made out it is personal to that defendant and does not involve any general ruling as to the validity of the rate.
Bigger Issue :
73. Returning then to the answer to Question 1, namely, whether the Circuit Court has jurisdiction to try the State Aid defence, I have concluded that the Appellant has a right to raise this issue derived from the fundamental EU law principles of direct effect and supremacy. It is difficult in principle to see why it should not be possible to raise this defence in any court in circumstances where a public authority institutes proceedings and undoubtedly an issue of EU law prima facie arises. If there was any reason in law why this would be so, the procedural rule which prevented it would be contrary to the principles of equivalence and effectiveness. I would therefore conclude that the Circuit Court does have jurisdiction in these proceedings to determine the State Aid defence as raised by the Appellant. In so doing I endorse the analysis of O'Malley J in the High Court at paras. 65-67 of her judgment.
74. In light of this resolution of these issues it does not appear to be necessary to address the interesting questions posed by the Court of Appeal's, and the parties', discussion of Mackman, Winder, O'Donnell, Williams and Shell . The issues therein arising are not essential to the resolution of the questions referred and therefore can be left over to another day. However, I find that I have succumbed to the temptation to voice a few thoughts on this case law, albeit clearly on an obiter basis only.
75. It might be said that neither Mackman nor O'Donnell is entirely satisfactory. The Mackman exclusivity principle establishes an extreme position from which the UK courts have resiled almost since its inception; the number of exceptions since developed illustrates that, in some respects at least, it is not a satisfactory principle. If looked at afresh, some other approach giving rise to a more flexible approach would likely be put in place.
76. In this jurisdiction, on the other hand, the case of O'Donnell , though certainly well regarded, might be said to go too far the other way. It is a rather simplistic to say that a party may have its choice of plenary proceedings or judicial review but, if it elects for the former, the safeguards of the latter will apply. The purpose of Order 84 was to ensure that public law decisions would be dealt with through the prism of judicial review and so that the procedures thereof would apply. To merge that with plenary proceedings, subject only to safeguards applying, seems to devalue what was intended by having a discrete role carved out for judicial review. While on occasion there will be no difference in outcome depending on which route is utilised, there are other situations where there may well be. If in fact the purpose and intention of the significant rule change effected by placing judicial review in an area outside plenary proceedings was to designate judicial review as the appropriate avenue for public law matters, then this issue probably should be looked at afresh at some time in the future when the occasion demands it. In any event, these are matters which do not require resolution here.
77. Finally, as much has been said about them in the submissions, in the court below, and in the judgment of Charleton J, it is necessary to say a word about the decisions of this Court in Gavin and Williams. I have taken the view that West Wood's raising of the State Aid point as a Defence is not an attack on the validity of the rate. Both Gavin and Williams were "validity" cases, in the sense that the defendant's argument in each was to the effect that the underlying measures were invalid and thus the proceedings against them had no sustainable basis in law. However, that is not the situation in this case: this because of the various matters identified, inter alia , at paragraph 62, above, and even if those difficulties are overcome, any judgment in favour of West Wood could have no erga omnes effect. In any event and as stated elsewhere, it is not a "validity" challenge in the sense discussed. Accordingly, I do not see that this line of authority has any direct application in the instant case.
Question No. 3 :
78. What remains live is to consider the third question before the Court. It asks, in essence, whether, if the Circuit Court has jurisdiction to entertain the State Aid defence, it also has jurisdiction to award damages to the Appellant untrammelled by the general monetary restrictions on the Circuit Court in civil matters: this arises by reference to the fact that its monetary jurisdiction is unlimited in rates recovery cases.
79. It must be said that the foundation upon which this ground of appeal must be addressed is not entirely satisfactory. Hogan J, in the court below, did not express any views on this question at all (for it did not arise on his resolution of the other issues). While O'Malley J did so in the High Court, it is clear from paragraphs 68(f) and (g) of her judgment that many aspects of this issue went unaddressed by the parties and the views expressed by the learned judge must be described as being somewhat preliminary in nature, given the lack of detailed argument on this point. West Wood has made submissions, but it is clear that it conceives of damages as a secondary remedy to be considered only in circumstances where it has successfully made out the State Aid defence but where the primary relief sought by it, which is the dismissal of the Council's claim for the unpaid rates, has not been granted. If such relief were to be granted then the issue of damages simply would not arise. The Council has not really engaged with the point, saying only that how and what penalty should be imposed would be a matter for argument, having heard all the evidence.
80. Be that as it may, there remains this serious question regarding what the Circuit Court may do if it finds that the State Aid defence has been made out. There cannot be any argument that the Circuit Court could grant a declaration or injunction or other public law remedy which is freely available in the High Court. Unlike the High Court, the Circuit Court has no such general jurisdiction to grant injunctive or declaratory relief.
81. The Circuit Court would appear at first glance to have two options: (i) to dismiss the proceedings or (ii) to allow the claim if the formal and other statutory proofs were made out and then address the established grievance on the EU side through the counterclaim, i.e. by granting the decree but nullifying its value through an award of damages in an equal amount on the counterclaim. Both are routes to the same end point as far as West Wood is concerned. If the claim for recovery of rates were to be dismissed following a successful invocation of the State Aid point, then it is unlikely that the damages issue would ever be pursued. This might be the simpler route, but is one which suffers from a number of problems. First, it is arguably incompatible with existing national law whereby, subject to quite limited circumstances such as the non-rateability of the property or the non-occupation by the defendant of that property, the court should grant the decree upon the satisfaction of the formal proofs. Secondly, such may either over- or under-compensate the consequence of the infringement for the complainant, i.e . West Wood in this case. If the amount of any recovery claim should be small or limited, then a simple dismissal may not be an adequate remedy. On the other hand, where the claim is substantial, a simple dismissal may be over-generous to compensate for the effects of the infringement. If either should be the case, the matter would be required to be resolved in a different way.
82. As an aside, it should be observed that at one point West Wood's defence and counterclaim seem to blur two separate points: first, that the grant of money or subsidy to the leisure centres, part of which is derived from the rates collected, is State Aid; and, second, that the exemption of the Council's leisure centres from rates is also State Aid. These are two discrete arguments which would have to be considered separately. However, while the second point was initially raised as part of West Wood's defence, it was not relied on by the Appellant as part of the appeal, which rested instead on the subsidy/subvention issue first mentioned. It is not apparent whether the "exemption" issue has been formally dropped by West Wood but it is worth noting that it is important to distinguish between these two separate arguments.
83. In any event, the foundation upon which the troublesome part of this question is based is the assumption that damages can be awarded where an infringement of Article 108(3) is alleged, and that in this case it would be appropriate to so do if that had been established. Furthermore, the question also assumes that the amount of any such damages would be equivalent to the arrears of rates as claimed in the Civil Bill. In their submissions West Wood, in terms of discussing what the appropriate remedy might be, recite the following:
"For this reason, recovery of aid is not the only means available to the national court to guarantee the effectiveness of the Article 108(3) prohibition. Thus for example where aid has been financed by charges imposed on undertakings, for example parafiscal charges, the national court in order to nullify the effects of the aid, may have to order restitution of those charges." (Bacon, State Aids in the English Courts: Definition and Other Problems in Beondi, Eeckhaunt & Flynn, The Law of State Aid in the European Union (2003), citing the FNCEPA case, Opinion of Advocate General Jacobs, para. 27).
84. I am not at all sure that such citation is representative of what the mainstream reliefs might be, or what orders might be made, where an infringement of the State Aid rule on non-notification has been established. It seems to me that the circumstances in which State Aid has occurred will play a pivotal role in deciding how any established violation should be remedied. Certainly I believe that the question of damages is not in any sense at the forefront of what might be appropriate.
85. Taking the jurisdictional point out of this discussion for a moment, by focussing on the hypothetical situation of these proceedings being in the High Court, that court, in the context of a case such as this, may have numerous options open to it. The court, in light of the nature, scope and effect of any infringement, would have to make a decision on what would be an appropriate and effective remedy. This is no easy exercise. In the first instance, the purpose behind the prohibition contained in Article 108(3) is that without authorisation the Aid should not be granted and certainly should not be utilised in a manner prohibited by Article 107. All competitors should have an equal playing field: one should not be selectively advantaged over another. Consequently, where that can be prevented from having any effect on competitors in the internal market, such would be sufficient to deal with the matter. However, when dealing with continuing events, the shape of the remedy becomes more complicated and gives rise to considerations which are different from a once-off situation.
86. Take this case as an example. Should West Wood, following the establishment of an infringement, be satisfied with an order prohibiting future subvention, taking effect from the date of that decision? It is very difficult to see how they could argue otherwise or submit that they should be absolved from the future payment of rates. It is not the situation that in order to equalise, one should avoid the payment of taxation which is otherwise entirely lawful. There is no doubt but that West Wood is in occupation of a property which, subject to the State Aid argument, has been correctly rated under the Valuation Acts; the rate on the euro has been calculated and set and the Appellant is liable to pay what has been correctly appropriated to their property. Why should they not have a continuing obligation to discharge this liability if the infringement can otherwise be dealt with? If, therefore, West Wood was to simply get a dismissal of this action or on a counterclaim obtain a decree in the amount of the claim, they would in effect be avoiding an obligation which clearly they have under national law. Furthermore, since that obligation is on a continuing basis, they would in effect be excused from paying rates so long as some subvention, greater than de minimus , continued to be available out of the local authority's general fund. This is highly unattractive and, unless necessarily demanded, should be avoided.
87. In this context it is worth returning to the Commission Notice on the Enforcement of State Aid Law by National Courts , where it says this in respect of damages claims:
88. These principles derive from, inter alia , the decision of the Court of Justice in Case C-199/06 CELF and Ministre de la Culture et de la Communication [2008] ECR I-469, where it stated as follows at paras. 53 and 55:
"53 Within the framework of its domestic law, [the national court] may, if appropriate, also order the recovery of the unlawful aid, without prejudice to the Member State's right to re ‑ implement it, subsequently. It may also be required to uphold claims for compensation for damage caused by reason of the unlawful nature of the aid (see, to that effect, SFEI and Others , paragraph 75, and Transalpine Ölleitung in Österreich and Others , paragraph 56).
…
55 The reply to the first question referred must therefore be that the last sentence of Article 88(3) EC is to be interpreted as meaning that the national court is not bound to order the recovery of aid implemented contrary to that provision, where the Commission has adopted a final decision declaring that aid to be compatible with the common market, within the meaning of Article 87 EC. Applying Community law, the national court must order the aid recipient to pay interest in respect of the period of unlawfulness. Within the framework of its domestic law, it may, if appropriate, also order the recovery of the unlawful aid, without prejudice to the Member State's right to re-implement it, subsequently. It may also be required to uphold claims for compensation for damage caused by reason of the unlawful nature of the aid."
Similarly, in Transalpine Ölleitung in Österreich the Court at paragraph 56 stated that:
"Depending on what is possible under national law and the remedies available thereunder, the national court may thus, according to the case, be called upon to order recovery of unlawful aid from its recipients, even if that aid has subsequently been declared compatible with the common market by the Commission. In the same way, a national court may be required to rule on an application for compensation for the damage caused by reason of the unlawful nature of the aid."
89. The Commission Notice on the Enforcement of State Aid Law by National Courts then says as follows in respect of the possibility of damages under Community law for breach of the standstill obligation:
"45. Irrespective of the possibility to claim damages under national law, breaches of the standstill obligation have direct and binding consequences under Community law. This is because the standstill obligation under Article 88(3) of the Treaty is a directly applicable rule of Community law which is binding on all Member State authorities. Breaches of the standstill obligation can therefore, in principle, give rise to damages claims based on the ‘ Francovich ' and ‘ Brasserie du Pêcheur' jurisprudence of the ECJ. This jurisprudence confirms that Member States are required to compensate for loss and damage caused to individuals as a result of breaches of Community law for which the State is responsible. Such liability exists where: (i) the rule of law infringed is intended to confer rights on individuals; (ii) the breach is sufficiently serious; and (iii) there is a direct causal link between the breach of the Member State's obligation and the damage suffered by the injured parties."
90. Assuming, but by no means deciding, that West Wood would, in the event of its State Aid defence being successful, be able to claim damages, the third question really is also a jurisdictional one in that at its essence is the question of whether or not the Circuit Court has unlimited jurisdiction in that regard. I say "unlimited" because under various provisions of the Courts (Supplemental Provisions) Act 1961, as amended, its monetary value, at the highest level, cannot exceed €75,000, albeit for the reasons mentioned above that manifestly does not apply in rates recovery cases.
91. In the judgment of O'Malley J in this case, the learned judge, having referred to the decision of the Court of Justice in Case C-39/94 SFEI v La Poste [1996] ECR I-3547, went on to comment on what law would govern the question of damages if such should be available in a case of this nature. It is a matter for national law to determine whether, in a given set of circumstances, a right to damages arises. In her view, the question of damages is governed by national law, including national rules as to the monetary jurisdiction of different courts. O'Malley J observed that any counterclaim would therefore be subject to the general monetary limits of the Circuit Court. There therefore cannot be any argument but that national law governs national procedural rules and regulations. The principles of effectiveness and equivalence do not in any way arise in this aspect of the case. Given my earlier views on the capability of West Wood being able to raise this defence in the Circuit Court, that satisfies the requirement of EU law as directly applied. This debate is about remedy; in particular, it is about damages. Therefore it is governed by national law. No direct attempt has been made to suggest that if the Circuit Court was confined within its normal jurisdiction as to damages, such would infringe either of those principles. The real issue is, what is that jurisdiction under national law.
92. It is therefore necessary to turn to an issue of statutory interpretation that, although mainly debated by the parties as part of Question No.1, also has a clear relevance for Question No. 3. In concerns the construction of certain subsections of section 22 of the Courts (Supplemental Provisions) Act 1961, which sets out the jurisdiction of Circuit Court, except in applications for new on-licences and in indictable offences. Subsection 22(6) provides as follows:
"(6) The Circuit Court, as regards any cause of action for the time being within its jurisdiction, shall in any proceedings before it—
as ought to be granted or given in the like case by the High Court and in as full and ample a manner."
93. Subsection 22(8) should also be recited:
"(8) Any party to an action commenced in the Circuit Court and pending therein may at any time apply to the judge of the Circuit Court before whom the action is pending to have the action forwarded to the High Court and thereupon, in case the action is one fit to be tried in the High Court and the High Court appears to be the more appropriate tribunal in the circumstances, the said judge may send forward the action to the High Court upon such terms and subject to such conditions as to costs or otherwise as mayappear to him to be just, and an appeal shall lie under section 38 of the Act of 1936, as applied by section 48 of this Act, from the decision of the judge granting or refusing any such application."
I will return to the relevance of this subsection below.
94. West Wood submits that the monetary limitation to the jurisdiction of the Circuit Court does not apply to the counterclaim in this case. Such would be to accord a widespread jurisdictional remit upon the Circuit Court which has not heretofore been recognised. It would, in effect, mean that the jurisdictional limits of the Circuit Court are irrelevant and that that court has unlimited jurisdiction on a counterclaim even where the claim itself is limited or indeed where, for whatever reason, it is not being pursued. I must say that it would be most surprising, if this was the proper construction of the section, that this would not have been flagged and considered before now.
95. While I accept that there are different ways of reading the subsection, in my view it does not mean that if you are sued in the Circuit Court then any counterclaim could attract all of the remedies which are vested in the High Court. The opening words of subsection (6) refer to "any cause of action … within the jurisdiction of the Circuit Court". It therefore qualifies both subparas (a) and (b) which follow. The "full and ample … manner" relates to relief, redress or remedy within the jurisdiction of the Circuit Court.
96. The cause of action in this case is the Rates Recovery Civil Bill which, under section 78 of the Poor Relief Ireland Act 1838, is unlimited in amount. That is simply the initiating cause of action. However, a distinction exists as between the cause of action as mounted and the counterclaim pursued in response. Conceptually a counterclaim is quite a different cause of action from the initial claim for relief. A counterclaim (here, for damages for breach of EU law) is itself a cause of action. Considered another way, if, for whatever reason, the underlying cause of action (for recovery of rates) were to fall away, any defence which existed as a separate cause of action or a counterclaim would be subject to the overall jurisdiction of the Circuit Court. Therefore, insofar as a defence or counterclaim is a cause of action, it must be subject to the same jurisdictional limits as any other cause of action. There is no question, on the wording of the section, of the damages counterclaim "piggybacking" on the fact of there being unlimited jurisdiction in the rates recovery claim. The counterclaim for damages is a distinct cause of action. Thus if damages are to be given for an infringement of State Aid, this must be assessed by reference to the Circuit Court's jurisdiction to award civil damages generally.
97. In my view, therefore, given that the counterclaim is a "cause of action" for damages for breach of the State Aid rules, within the meaning of section 22(6), it follows that it is subject to the usual jurisdictional limits of the Circuit Court. I would add that I do not read Order 15(7) of the Circuit Court Rules as altering in any way my conclusion on this point.
98. To conclude, West Wood's counterclaim evidently exceeds the jurisdiction of the Circuit Court in relation to damages. I agree with O'Malley J that "the obligation on national courts to provide a remedy for a breach of EU law does not … extend to breaching national procedural rules (here, rules relating to jurisdiction) where that is not necessary under the principles of equivalence and effectiveness." In my view, therefore, the Circuit Court does not have jurisdiction to award West Wood damages in excess of its general monetary jurisdiction, and could not award damages equal to an amount of the judgment granted to the Council beyond that threshold. It should be remembered, however, that there may be remedies available other than damages.
99. Finally, I have made reference above to subsection 22(8). It provides for an application by a party to an action pending before the Circuit Court to have the action forwarded to the High Court and envisages that such an action will be sent forward where the High Court is the more appropriate tribunal in the circumstances (subject to such terms and conditions as appear just). While the parties have not made reference to this provision, it must be observed that given the nature of the issues raised and the examination that will be required in respect of the State Aid defence, the High Court would certainly appear to be the more appropriate tribunal for such exercise. Moreover, that court would not be subject to the same jurisdictional monetary cap in respect of the counterclaim for damages, and neither would it be restricted in terms of other, perhaps more appropriate, reliefs which it could grant, thus making it all the more appropriate for the issues raised to be disposed of by that court.
100. Given the view that I have taken on the case, it is quite evident that no question of a reference to the CJEU arises.
Conclusion
101. For the reasons set out in this judgment, I would answer the questions posed as follows:
Question 1 : Does the Circuit Court have jurisdiction in the instant proceedings to entertain the State Aid argument?
Yes, the Circuit Court does have jurisdiction to entertain a claim that State Aid may constitute a defence in the context of proceedings issued for the purpose of recovery of rates. However, this answer must be read in the context of the discussion above held on that issue, which makes it clear that I express no view whatsoever on whether such a defence could be established.
Question 2 : Is the issue raised a challenge to the validity of the rate itself?
No, the State Aid point raised by the Appellant is not a general challenge to the validity of the rate itself; thus the issue of whether it is to be dealt with by way of judicial review only does not arise.
Question 3 : If the appellant should be successful on the issue, does the Circuit Court have unlimited jurisdiction on the question of damages?
No - any counterclaim for damages is limited to the general monetary jurisdiction of the Circuit Court.
For the questions in their entirety, see para. 6 supra.
102. I would therefore remit this matter for hearing by the Circuit Court in the light of this judgment.
