Trinity Term
[2019] UKPC 27
Privy Council Appeals
No 0023 and 0025 of 2017
JUDGMENT
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The
State of Mauritius and another (Appellants) v The (Mauritius) CT Power
Ltd and others (Respondents) (Mauritius)
The State of Mauritius and another (Appellants) v The (Mauritius) CT
Power Ltd and others (Respondents) (Mauritius)
From the Supreme Court of Mauritius
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before
Lord Reed
Lord Kerr
Lady Black
Lord Briggs
Lord Sales
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JUDGMENT GIVEN ON
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10 June 2019
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Heard on 4 April 2019
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Appellants
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Respondent
(via video link)
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James Guthrie QC
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Desiré Basset SC
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Carol Green-Jokhoo
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Nandraj Patten
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Heetesh Dhanjee
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(Instructed by Royds
Withy King)
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(Instructed by Blake
Morgan LLP)
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5th
Co-Respondent
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Ravindra Chetty SC
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Yashley Reesaul
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(Instructed by Sheridans)
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LORD SALES:
1.
This appeal raises issues regarding the
interaction of private law and public law in relation to the negotiation of a
commercial contract for the implementation of a project for the construction of
a new electricity generating plant for Mauritius at Pointe aux Caves in the
districts of Black River and Port Louis (“the project”).
The background to the dispute
2.
Since 2006 the respondent (“CT Power”) has been
working to develop plans and to obtain regulatory approval and financing for
the project. CT Power proposed that it should build and run the plant. The
customer for the electricity it would produce was to be the Central Electricity
Board (“the CEB”). The details of the project have changed over time. The
original proposal was for construction of a 3 x 50 MW coal power plant, but
that was changed in late 2006 to a proposal for construction of a 2 x 55 MW
coal power plant. CT Power was to pay for the construction of the plant by a
combination of debt finance and equity finance.
3.
In 2007 there was public consultation in
relation to the project and Environmental Impact Assessment (“EIA”) reports
were prepared for CT Power with a view to it applying for an EIA licence to be
issued pursuant to the Environment Protection Act 2002 (“the EPA 2002”).
Section 15(2)(b) of that Act, read with Part B of the Fifth Schedule to the
Act, prohibits commencing a project for construction of a power generating
plant without an EIA licence. Section 15(2)(c) prohibits commencement of a
project “more than 3 years after the issue of an EIA licence … unless the
Minister, in circumstances beyond the control of the proponent, otherwise
determines …”. The effect of this is that an EIA licence, if granted, allows a
relevant project to be commenced at any time within three years after the date
of the licence. Section 23 provides that the relevant Minister may approve the
issue of an EIA licence subject to terms and conditions. Where the Minister
refuses to issue an EIA licence, an appeal lies to the Environment Appeal
Tribunal.
4.
In December 2008 CT Power and the CEB entered
into a suite of agreements, comprising a Coal Supply Agreement, an
Interconnection Facilities Design and Build Agreement and a Power Purchase
Agreement. It was a condition of the Power Purchase Agreement that before
coming into effect there would need to be in place what was termed an
“Implementation Agreement” between the Government of Mauritius and CT Power,
which would include a guarantee by the Government to ensure payment of the
price due from the CEB to CT Power for supplies of electricity to be made under
the Power Purchase Agreement. The guarantee which it was proposed the
Government should give under the Implementation Agreement was an important
commercial feature of the arrangements for the project, since it was likely
that the ability of CT Power to secure financing to implement the project would
depend upon its being able to demonstrate that once built the plant would
generate a secure income stream.
5.
Negotiations between the Government and CT Power
regarding the detailed terms of the Implementation Agreement commenced in about
January 2009. However, no final version of the Implementation Agreement was
signed by those parties.
6.
Further work was done to produce an updated and
expanded Environmental Impact Assessment. In 2010 this was submitted by CT
Power to the Minister of the Environment in support of its application for an
EIA licence in relation to the project. By a decision dated 18 January 2011 the
Minister of the Environment rejected CT Power’s application.
7.
CT Power appealed to the Environment Appeal
Tribunal. By a decision dated 16 July 2012 the Tribunal allowed the appeal and
ruled that an EIA licence should be issued for the project. The Tribunal
directed that the EIA licence to be issued should be subject to certain
conditions identified by itself and that the Department of the Environment
should also have the opportunity to consider whether to add other conditions.
CT Power had to re-design the project to comply with the conditions imposed by
the Tribunal.
8.
Pursuant to the ruling of the Environment Appeal
Tribunal, on 23 January 2013 the Department of the Environment issued the
necessary EIA licence for the project (“the EIA licence”). As noted above, by
virtue of section 15 of the EPA 2002 the EIA licence had effect for three years
from that date. The EIA licence was made subject to various conditions.
Condition 15 of the EIA licence (“Condition 15”) stated as follows:
“The proponent
[ie CT Power] shall undertake to provide proof of its financial capabilities
for the duration of the project to the satisfaction of the Ministry of Finance
and Economic Development.”
9.
It is common ground that Condition 15 is a valid and
proper condition in the EIA licence, which sufficiently relates to the
environmental protection objects of the EPA 2002 and cannot be regarded as ultra
vires that Act. In the Board’s view, Condition 15 plainly serves a
valid environmental objective: there needed to be assurance that CT Power would
be able to implement the project effectively, including satisfying all the
conditions in the EIA licence, and would not be liable to become insolvent part
way through at a time when substantial harm might have been done to the
environment without any of the hoped for public benefits from the scheme being
realised and harm-mitigation measures being put in place. It made sense for
Condition 15 to designate the Ministry of Finance and Economic Development
(“the Ministry of Finance”) as the department to evaluate the proof of
financial capabilities to be provided by CT Power, in view of its expertise in
relation to matters of finance.
10.
As well as being concerned for environmental protection reasons to
ensure that CT Power was financially robust, the Government also had a
commercial concern in that regard. The guarantee which the Government was being
asked to give under the Implementation Agreement was an onerous contractual
commitment in respect of the price to be paid for electricity supplies
extending many years into the future and it is unsurprising that the Government
should wish to confirm that CT Power, as its contractual counterparty, would be
reliable and in good financial order before making such a commitment.
11.
On 25 March 2014 the then Minister of Finance made a statement in the
National Assembly in which he said, “as far as checking the financial
capability, the financial standing and the quality of the people who would
invest in the project, obviously we need to know who will be the final
shareholders and who will be the final financiers.” On 11 July 2014 the then
Deputy Prime Minister and Minister of Energy and Public Utilities stated in the
National Assembly that an important issue remained outstanding before the
Implementation Agreement could be finalised, namely that CT Power should
provide proof of funds for its equity contribution to the project.
12.
On 18 July 2014 there was a discussion between representatives of CT
Power and representatives of the Minister of Energy and Public Utilities (“the
Minister of Energy”), for the Government, in respect of the Implementation
Agreement. On 21 July 2014 lawyers acting for CT Power sent the Minister of
Energy a draft of the Implementation Agreement marked with comments which
reflected those discussions (“the draft Implementation Agreement”). It is clear
from the face of the draft Implementation Agreement that it had not been agreed
and that in various material respects it contained draft terms which CT Power
wished the Minister of Energy to consider.
13.
Clause 7 of the draft Implementation Agreement was in these terms and
had appended to it the following note:
“7. Condition
7.1 The [Government] and [CT
Power] hereby acknowledge and accept that this Agreement is subject to [CT
Power] providing proof of its financial capabilities for the duration of the
Project to the satisfaction of the Ministry of Finance and Economic development
within nine (9) months from the date of this Agreement.
7.2 For the avoidance of
doubt, [CT Power] shall be deemed to have satisfied the Condition and as
stipulated in Condition 15 of the EIA Licence by achieving Financial Close [ie
confirmation to the CEB that CT Power had satisfied the relevant conditions
precedent to enable it to draw on its credit and other facilities under
agreements with its financiers].
7.3 In the event the
condition set out in clause 7.1 is not met within nine (9) months from the date
of this Agreement, the Parties agree that this Agreement and the guarantee
created hereunder shall lapse and be of no further effect and thereafter, the
Parties will have no claims of any kind whatsoever against each other with
respect to matters arising out of or in connection with this Agreement.
NOTE: This Condition has been
included at the request of the Ministry of Finance and Economic Development who
have confirmed that if Condition 15 of the EIA Licence is included in the
Implementation Agreement with a nine month time frame, the proposed amendments
to the Implementation Agreement as per our earlier draft dated 4.7.2014 are
acceptable to them. This is to impose a time frame in line with the Longstop
Date under the [Power Purchasing Agreement] to achieve Financial Close. In line
with this request and to avoid any further ambiguity on this condition and to
also prevent further delays on the Project itself, we have inserted the
provisions of clause 7.2 to clearly stipulate that once we have executed all
our Financing Documents showing preparedness to drawdown and commence
construction we would be deemed to have satisfied this condition. We hope this
is in line with the expectations of [the Government].”
14.
Clause 7, had it been agreed, would have made the provision of proof of
CT Power’s financial capabilities and satisfaction of Condition 15 into a
condition subsequent, taking effect after the Government and CT Power had
entered into the Implementation Agreement and become bound by its terms, rather
than something to be sorted out to the Government’s satisfaction before it
signed the Implementation Agreement, as the Deputy Prime Minister had indicated
on 11 July 2014.
15.
Clause 12.7 of the Implementation Agreement set out a waiver of
sovereign immunity to be given by the Government, on the basis of an
acknowledgement by the Government “that the execution, delivery and performance
by it of this Agreement constitute private and commercial acts rather than
public or governmental acts …”.
16.
The final terms of the Implementation Agreement were not agreed and it
was never signed.
17.
CT Power provided to the Government a joint letter of comfort dated 10
October 2014 from Bank of America and Bank of India in relation to provision of
loans to CT Power of up to US$280m if the project went ahead. This letter
appears to have been satisfactory to the Ministry of Finance so far as the debt
element of the funding of the project was concerned.
18.
By letter dated 5 December 2014 sent on behalf of CT Power to the
Minister of Energy, copied to the Minister of Finance, CT Power asked the
Government to expedite matters and to sign the Implementation Agreement by 23
December. The Government did not do so.
19.
On 10 December 2014 there was a general election, leading to a change of
Government.
20.
On 27 December 2014 the new Minister of Energy was reported in the press
as saying that the financial aspect of the project remained outstanding as an
issue and that the Attorney General had been asked to provide his advice.
21.
On 15 January 2015 there was a meeting between the Minister of Energy,
with officials, and representatives of CT Power. There is some dispute in the
evidence about what transpired, but it is not necessary to examine this further
because it is common ground that the Implementation Agreement was not signed
and that matters were to be debated further at meetings on 15 and 16 January
2015 attended by representatives of the Ministry of Finance, a representative
from the Attorney General’s office and representatives of CT Power.
22.
At those meetings, the representatives of the Ministry of Finance stated
that a letter of comfort was required in relation to the equity financing for
the project and a draft of that letter was agreed. Again, there is some dispute
in the evidence. According to the affidavit evidence of Babita Jowaheer filed
by CT Power, the draft of the required letter of comfort was agreed “subject to
the caveat that the issuer of the comfort letter could vary, amend or modify
the terms discussed in order to comply with applicable regulations and legal
advice”. The deponent for the Ministry of Finance, Visanaden Soondram, denies
that there was any such caveat. For reasons given below, it is not necessary to
resolve this dispute of fact.
23.
The draft of the comfort letter which was agreed was headed “Bank
Comfort Letter”, referred to the project and stated as follows:
“This is to confirm that we have
reviewed the project documentation including the financing structure of the
Mauritius CT Power Project. Our appraisal also covers the financial strengths
of CT Power Holdings Ltd, which would contribute 58% of the equity in [CT
Power].
In light of our review, we confirm
that CT Power Holdings Ltd has the financial capabilities to meet its equity
contribution as follows:
Year 1
(a) USD (…) million has
been spent as at (date) based on audited accounts;
Year 2
(b) Up to USD (…) million
on or before the expiry of two years after issuance of the Notice to Proceed to
construct the Plant; and
Year 3
(c) Up to USD (…) million
on or before the expiry of three years after issuance of the Notice to Proceed
to construct the Plant.
Funds in respect of items (b) and
(c) above shall not originate from activities contravening Anti-Money
Laundering Legislation or from any other illicit activities.
This letter is not to be construed
as a commitment by us to provide funding or guarantee the payment obligations
of CT Power Holdings Ltd as equity contribution.
This letter of comfort was duly
authorized by a resolution of the Bank dated …, a copy of which is annexed.
Yours truly,
Signed
…
Seal of the Bank.”
24.
In the copy of this document exhibited to Ms Jowaheer’s affidavit the
final sentence has been crossed out and the words “Two signatories” written
instead in manuscript. Again, to the extent that there may be a dispute in the
evidence as to whether that change was agreed or not, it is unnecessary to
resolve it for the purposes of determining this appeal.
25.
It appears from a statement made later in the National Assembly by the
Minister of Energy, on 3 March 2015, that on 6 February 2015 the Government
decided that CT Power should state its source of funding “within a reasonable
delay” (ie within a reasonable time), failing which the project would not be
implemented. However, CT Power was not informed about this decision at the
time.
26.
Despite not being informed about the decision of 6 February, on about 27
February 2015 CT Power provided the Government with a letter of that date from
Avendus Capital UK (Private) Ltd (“Avendus”) addressed to the Minister of
Finance (“the Avendus letter”).
27.
The Avendus letter referred to the project and continued in relevant
part as follows:
“We have been requested by CT
Power Holdings Ltd (the ‘Company’) to write to you in connection with the
Company’s proposed investment in the Project by way of an equity contribution
into [CT Power] (the ‘Project Company’) (the ‘Transaction’).
This letter is provided to you,
with the consent of the Company, for information only in relation to your due
diligence, and for no other purpose. …
In connection with the Transaction
we have carried out a high level review of the Subscription and Shareholders’
Agreement in relation to the Project Company dated 11 April 2014 and other
relevant project documents including the financing arrangements for the Project
reflected in the same, listed in a letter of even date from us to the Company
(together, the ‘Documents’).
Subject to the qualifications set
out below, we confirm that, to the best of our knowledge and belief, the
Company has the financial capabilities and/or legal rights to allow it to meet
the following equity contributions in the Project Company:
Year 1
(a) USD 13m on or before
the expiry of one year after issuance of the notice to proceed to construct the
Project;
Year 2
(b) Up to USD 31m
(including the USD 13m referred to above) on or before the expiry of two years
after issuance of the notice to proceed to construct the Project; and
Year 3
(c) Up to USD 41m
(including the USD 31m referred to above) on or before the expiry of three
years after issuance of the notice to proceed to construct the Project.”
The figures stated above are
cumulative figures setting out the total equity injections which are to be met
by the Company for the specific periods set out above.
Our confirmation is based on the
following assumptions:
●
All of the Documents are duly executed by persons with the
requisite authority and capacity and constitute legal, valid, binding and
enforceable obligations of all the parties to them under all applicable laws;
and
●
The Company assumes no additional material obligations other than
under the Transaction.
Our confirmation is qualified by
the following:
●
The scope of this letter does not extend to legal, tax related or
other matters as to which the Company is being separately advised; and
●
This letter is not to be construed as a commitment by us to
provide funding or guarantee the payment obligations of the Company in respect
of its equity contribution.
We have acted for the Company and
for no one else in connection with the Transaction. On your instructions we
have provided this letter for information purposes only and, accordingly, we
accept no legal liability to you or any other person in relation to the
confirmations set out above. This letter is not a substitute for persons
interested in the Transaction performing their own due diligence in respect of,
and reaching their own conclusions with regard to, the Company, the Transaction
and the Documents.
We are authorised and regulated
by, and are subject to the applicable rules of conduct of business (including
the applicable anti-money laundering rules) of the Financial Conduct Authority
of the UK.
This letter and any
non-contractual obligations connected with it are governed by, and construed in
accordance with, English law and are subject to the exclusive jurisdiction of
the English courts.”
The letter was not stamped and bore only one signature on
behalf of Avendus, of Mr Gaurav Deepak, “Director”.
28.
CT Power maintains that the Avendus letter satisfied the requirements of
the Ministry of Finance for a bank letter of comfort as set out at the meetings
on 15 and 16 January referred to above. The Government contends that, on the
contrary, the Avendus letter plainly did not meet those requirements.
29.
On 3 March 2015 the Minister of Energy stated in the National Assembly
that CT Power had not satisfied Condition 15 of the EIA licence and that the
Ministry of Energy proposed to recommend to the Cabinet that the Government
should not proceed with the project, ie that it should not sign the
Implementation Agreement. On 5 March the Minister of Energy made a further
statement in the National Assembly, to the effect that he had consulted with
the Minister of Finance who agreed that the Avendus letter did not constitute a
letter of comfort as required by the Government. The Ministry of Finance
confirmed its view to the Ministry of Energy on 9 March.
30.
In the view of the Ministry of Finance, the Avendus letter did not
comply with the Government’s requirements as regards the letter of comfort as
explained at the meetings on 15 and 16 January because (a) there was no banking
licence number for Avendus on the face of its letter to indicate that it was a
licensed bank; (b) the Avendus letter did not contain any assurance that the
equity contribution would not originate from funds in breach of anti-money
laundering legislation and would not be of a tainted origin; (c) the Avendus
letter was not authorised by a resolution of Avendus (assuming it was a bank)
and its seal did not appear on the letter, which meant that in the view of the
Ministry of Finance it failed to provide assurance that the matter had been
considered at the highest level and authorised by the bank; (d) the Avendus
letter absolved Avendus from any legal liability to the Government in relation
to the confirmation it purported to give in relation to CT Power and CT Power
Holdings Ltd; and (e) the Avendus letter required any person interested in the
financing transaction to perform its own due diligence and reach its own
conclusion, and as such did not provide the required comfort to the
satisfaction of the Government.
31.
In relation to point (a), Avendus is in fact regulated by the UK
Financial Conduct Authority. In relation to point (c) the Board notes that even
if it had been agreed that a resolution of the relevant bank was not required,
but that the letter of comfort should be signed by two signatories instead, as
might be suggested by the evidence adduced for CT Power referred to above, the
Avendus letter did not comply with that requirement either.
32.
On 13 March 2015 the website of the Prime Minister’s Office reported
that the Cabinet had decided not to proceed with the project, referring in
particular to “the failure of the promoters of the project to submit evidence
of their financial capacity or the sources of funding.” The website stated that
the Government would consider other feasible options, “with necessary
transparency and clarity”, to meet Mauritius’s future electricity needs. The
information about the Cabinet’s decision was repeated by the Minister of Energy
in the National Assembly on 1 April and again on 2 April. He confirmed that the
Government would not sign the Implementation Agreement because CT Power could
not establish its financial capabilities to the satisfaction of the Government.
33.
CT Power was not informed directly about the Cabinet’s decision.
However, it learned of the decision at about the time these announcements were
made.
34.
On 8 April 2015 CT Power served notices mise-en-demeure (that is
to say, formal demands before action). On 25 May it commenced these proceedings
by applying for leave to apply for judicial review against the Ministry of
Finance and the Ministry of Energy, seeking a declaration that it had complied
with Condition 15 and an order of mandamus directing the Ministry of Energy to
sign the Implementation Agreement on behalf of the Government (this was later
amended to a claim for declaratory relief). The CEB was joined as an interested
party. The Supreme Court granted leave on 16 July 2015. The case proceeded to a
full hearing in the Supreme Court in early 2016. At the hearing, the Ministry
of Energy, supported by the CEB, submitted that the decision not to sign the
Implementation Agreement was not amenable to judicial review because it was a
purely private and commercial act. In this regard, Mr Chetty SC for the CEB
relied in particular on the waiver of sovereign immunity in clause 12.7 in the
draft Implementation Agreement. Counsel for the Ministry of Energy further
submitted that entering into the Implementation Agreement did not fall within
the statutory functions of the Ministry and the Minister.
35.
On 7 July 2016 the Supreme Court gave judgment in favour of CT Power:
(i)
The court reviewed English, Privy Council and Mauritian authorities and
concluded that the decision not to enter into the Implementation Agreement was
amenable to judicial review; clause 12.7 in the draft Implementation Agreement
was concerned only with waiver of sovereign immunity and did not have the
effect of ousting the judicial review jurisdiction of the court; and in
deciding whether or not to cause the Government to enter into the
Implementation Agreement the Minister of Energy was exercising his
responsibility for the conduct of the business of Government and his Ministry
as assigned under section 62 of the Constitution of Mauritius: paras 25-43;
(ii)
As regards the claim for judicial review of the decision not to sign the
Implementation Agreement, the court held that CT Power enjoyed a legitimate
expectation founded on what was set out in clause 7 of the draft Implementation
Agreement that it would have nine months after that agreement was signed
in which to provide proof of its financial capabilities, so that it was
unreasonable, unfair and against legitimate expectation for the Minister to
refuse to sign the Implementation Agreement on the basis that no such proof had
been provided in advance of signing; also, the court did not accept that CT
Power had been informed in meetings after 5 December 2014 that the signing of
the Implementation Agreement would be subject to the submission of a letter of
comfort, so the legitimate expectation flowing from clause 7 continued to have
effect and the refusal of the Ministry of Energy to sign the Implementation
Agreement was “unreasonable, unfair and against the legitimate expectation of
CT Power”: paras 44-48;
(iii)
In relation to the claim for judicial review of the decision of the
Ministry of Finance not to confirm that CT Power had complied with Condition 15
of the EIA licence, the court referred to leading authorities on legitimate
expectation; noted that it was only in the exchange of affidavits in the
judicial review proceedings that CT Power was informed of the reasons of the
Ministry of Finance for rejecting the Avendus letter as a satisfactory letter
of comfort and had not been given an opportunity to make representations why it
was satisfactory; and held that, assuming that the draft letter of comfort
proposed at the meetings on 15 and 16 January 2015 was in final form (as
maintained in the affidavit evidence for the Ministry of Finance: see above),
nonetheless CT Power had a legitimate expectation to be consulted and given an
opportunity to make representations before the Avendus letter was rejected, and
fairness would require that CT Power be informed why the Avendus letter did not
satisfy the Ministry’s requirements and be given an opportunity to explain why
in its view it did so: paras 49-57;
(iv)
The court made two declarations to reflect the reasoning in its
judgment: (a) that the reasons invoked by the Ministry of Finance in its
affidavits to decide that Condition 15 had not been satisfied were “unreasonable,
irrational and in breach of the legitimate expectation of CT Power”; and (b)
that the reasons invoked by the Ministry of Energy for not signing the
Implementation Agreement were “misconceived, unreasonable and irrational and in
breach of the legitimate expectation of [CT Power]”.
36.
In March 2017, CT Power issued a civil claim for damages (“the damages
claim”) in respect of its treatment by various agents (or préposés) of the
State of Mauritius, including the Ministry of Energy and the Ministry of
Finance, in relation to the failure to sign the Implementation Agreement and to
confirm that Condition 15 had been satisfied. CT Power claims that the acts of
the préposés amount to “faute lourde” (serious fault) under the law of
Mauritius for which the State of Mauritius is liable in tort as “commettant”.
CT Power claims compensation amounting to a sum equivalent to about £77.5m in
respect of its wasted costs in relation to the project and for loss of profits.
37.
The Ministry of Finance and the Ministry of Energy, supported by the
CEB, now appeal to the Board against the decision of the Supreme Court.
Discussion
Abuse of process
38.
At the outset, Mr James Guthrie QC for the appellants submitted that the
Board should rule that the judicial review proceedings against the Ministry of
Finance and the Ministry of Energy were an abuse of process, because they were
in reality merely a prelude to CT Power’s damages claim and all the issues
arising between the parties in the judicial review proceedings ought to have been
postponed to be dealt with exclusively in the context of the damages claim. The
Board does not accept this submission.
39.
There was no abuse of process involved in bringing the judicial review
proceedings. Judicial review claims are supposed to be brought promptly, and CT
Power would have been at risk of having its judicial review proceedings
dismissed if it had delayed. There is nothing to indicate that CT Power brought
the judicial review proceedings for any reason other than to vindicate its
claims for public law relief in those proceedings (it is entirely possible that
it only decided to bring its damages claim after it had considered the judgment
of the Supreme Court in those proceedings and now under appeal). Even if it had
had some other reason in mind, that would not have made it an abuse of process
for it to bring those proceedings. It had properly arguable claims which it was
fully entitled to bring before the court for it to rule upon them. It may have
been quicker and cheaper to proceed by way of judicial review to obtain
determination of the issues in those proceedings, even if they might have been
thought to be issues relevant to a possible claim for damages, and there would
be nothing abusive in taking advantage of the judicial review procedure in that
way. In situations (not this case) where a judicial review claim is brought at
the same time as a damages claim, the way in which those claims are handled,
perhaps by staying one or the other, will be a matter for case management by
the local courts: compare Panday v The Judicial and Legal Service Commission
[2008] UKPC 52, para 22, and Emtel (Mauritius) Ltd v The Ministry of
Telecommunication [2000] UKPC 36, para 44. The Board notes that the
practice of the courts in Mauritius would appear to make it difficult to hear
such claims together (see Emtel Ltd v The Telecommunication Authority 2002
SCJ 130); nonetheless, that might be a further case management option which
could be explored in an appropriate case if it were clearly in the interests of
justice that this be done.
40.
In any event, in the present case there is no precise overlap between CT
Power’s judicial review claim and its damages claim. The judicial review claim
depends upon whether the Ministry of Finance and the Ministry of Energy acted
lawfully, as required by the usual rules of public law. No distinct standard of
fault is in issue. By contrast, the “faute lourde” standard on which the
damages claim is based involves an examination of whether public officials were
at fault in acting with serious disregard for their public law duties: see the
discussion in Mario Alain Chung Ching Ah Sue v The State of Mauritius 2015
SCJ 110. The judicial review claims and the damages claim give rise to
different remedies, and CT Power will have to prove serious fault in the
damages claim which it does not have to prove in its judicial review claims.
There would be nothing abusive in CT Power wishing to contend for relief to
which it may be entitled as a matter of public law, whether or not it might
also wish to bring a claim for damages based on a more demanding legal test.
The ambit of the court’s judicial review jurisdiction
41.
The next submission made by Mr Guthrie was that the Supreme Court was in
error in holding that the refusal by the Ministry of Finance to confirm that CT
Power had satisfied Condition 15 and the refusal of the Ministry of Energy to
cause the Government to enter into the Implementation Agreement were amenable
to judicial review. Mr Guthrie contends that, as a matter of principle, both
decisions lie outside the scope of the judicial review jurisdiction of the court,
because they both involve matters of commercial judgment and are decisions of a
purely private nature having nothing to do with public law. The Board
disagrees.
42.
Dealing first with the decision of the Ministry of Finance in relation
to Condition 15, in the Board’s view that was plainly a matter falling within
the scope of public law and the court’s judicial review jurisdiction. Condition
15 was a condition in a regulatory instrument, the EIA licence, issued pursuant
to the EPA 2002. By that condition, the Ministry of Finance was given a
function to perform in the public interest as part of the operational
mechanisms to ensure the proper fulfilment of the public interest objectives of
the EIA licence and the EPA 2002. In deciding whether or not to accept that
Condition 15 had been satisfied, the Ministry of Finance was required to act in
accordance with usual standards of public law and in the usual way could be
subject to judicial review if it did not. It is a separate question, to which
the Board returns below, whether the Ministry of Finance did anything unlawful
in taking the decision it did.
43.
The Board also considers that the decision of the Ministry of Energy to
refuse to sign the Implementation Agreement is in principle within the scope of
the court’s judicial review jurisdiction. It is true that a decision whether or
not to enter into a contract involves deciding whether to accept obligations
sounding in the private law of contract. However, a contract is made between
legal persons, and where the person who is a proposed party to a contract is a
public authority the way in which it may behave is subject to rules of public
law; and whether the public authority has acted lawfully in accordance with
those rules is a matter which may be subject to judicial review. The Board
would add that the same point about the relevance of rules of public law can be
made regarding a decision by a public authority whether and how to exercise
rights sounding in private law conferred by a contract into which it has
entered: see Mercury Energy Ltd v Electricity Corporation of New Zealand Ltd
[1994] 1 WLR 521 (PC), in particular at p 526A-D (decision to give notice
to terminate a commercial contract for the bulk supply of electricity). Again,
it is a separate question what public law standards apply and whether the
Ministry of Energy did anything unlawful in terms of those standards in taking
the decision it did: see below.
44.
The Board agrees with the ruling of the Supreme Court at para 42 of its
judgment that clause 12.7 of the Implementation Agreement cannot oust the
judicial review jurisdiction of the court. In the Board’s view, that is for three
reasons: (i) the Implementation Agreement was not signed and never came into
effect; (ii) in any event, clause 12.7 is irrelevant to the issue of the
availability of judicial review: it is a provision which is concerned with a
quite different topic, namely to ensure that the Government would not attempt
to rely on the principle of sovereign immunity to deny the enforceability of
the Implementation Agreement if that agreement were signed; and in addition
(iii) a contract between a public authority and a private party cannot remove
the judicial review jurisdiction of the court, which exists to safeguard the
public interest.
45.
The Board therefore turns to consider whether the Ministry of Finance or
the Ministry of Energy acted unlawfully according to public law standards in
making their respective decisions to refuse to confirm that Condition 15 had
been satisfied and to refuse to sign the Implementation Agreement. It will
address the decisions in that order.
The decision of the Ministry of Finance in relation to
Condition 15
46.
In the Board’s view, the Ministry of Finance acted lawfully in taking
its decision. The Supreme Court fell into error in holding otherwise.
47.
Condition 15 of the EIA licence laid down a requirement that CT Power
provide proof of its financial capabilities for the duration of the project “to
the satisfaction of the Ministry of Finance …”. The question whether this
requirement was satisfied was thus a matter which depended upon the opinion of
the Ministry of Finance, and moreover was one involving complex assessment
regarding the financing structure for the project and the likely robustness of
that structure for years into the future. These features mean that in deciding
whether Condition 15 had been satisfied the Ministry of Finance had a wide
margin of appreciation in making the complex evaluative judgment required. The
Supreme Court did not suggest otherwise.
48.
There is, rightly, no suggestion that the Ministry of Finance acted in
bad faith or in any way irrationally or improperly in laying down any of the
requirements it set out in the draft letter of comfort agreed at the meetings
on 15 and 16 January 2015. The Ministry of Finance was therefore lawfully
entitled to look to see whether the Avendus letter, which was proffered by CT
Power in purported compliance with what it had been told was required, met those
requirements.
49.
In the Board’s view, the Ministry of Finance was well entitled to
conclude, as it did, that the Avendus letter failed to meet the requirements
which had been properly set by it and agreed by CT Power, by reason of points
(a) to (e) identified in the affidavit filed for the Ministry, referred to at
para 30 above. Point (a) (absence of a banking licence number from the face of
the Avendus letter) is not the weightiest reason, but was a legitimate factor
for the Ministry to take into account: it had made it clear that it required a
comfort letter from a bank, and there is no reason why the burden should have
been on the Ministry to undertake inquiries whether Avendus was or was not a
bank when that was not apparent from the face of its letter. Point (b)
(assurance that CT Power’s sources of funding did not offend against anti-money
laundering legislation) was correct: the Avendus letter failed to provide any
comfort on this question, referring instead to the fact that Avendus was
subject to the UK’s anti-money laundering rules, which plainly failed to meet
the Ministry’s concerns since it was not suggested that Avendus was providing
the finance for CT Power. Point (c) (the Avendus letter was not authorised by
resolution and did not bear the seal of a bank) was correct and the Ministry
was entitled to regard this as weakening the level of assurance the letter
provided should anything go wrong with the financing arrangements (and this
would be so even if it had been agreed at the meetings on 15 and 16 January
2015, as suggested in the evidence for CT Power, that the comfort letter should
bear two signatures on behalf of the bank instead of being accompanied by a
resolution of the bank, since the Avendus letter bore only one signature).
Point (d) (the Avendus letter absolved Avendus from any legal liability) and
point (e) (the letter required recipients to conduct their own due diligence)
were both correct and on any view constituted a major deficiency. Contrary to
the terms of the draft letter which had been agreed, the Avendus letter stated
in terms, “we accept no legal liability to you” in respect of the confirmation
purportedly given regarding CT Power’s ability to finance the required equity
investment and stated that it was up to persons interested in the transaction
(such as the Government) to perform their own due diligence to check on CT
Power’s financial capacities. As a result, if it turned out that there was in
fact a problem with the financing of the project, the Avendus letter provided
no comfort that the Government could have legal recourse against Avendus for
negligence in its examination of the financing arrangements and in giving such
confirmation. The absence of legal obligation on the part of Avendus also
tended to undermine the assurance the Government could derive from it about CT
Power’s financing capabilities, since Avendus might not have investigated these
matters with full care and attention.
50.
Even if the evidence adduced by CT Power to the effect that it was
agreed that there could be some limited modification of the terms of the draft
comfort letter were accepted (a matter left open by the Supreme Court, albeit
that at para 56 it was prepared to assume in the Government’s favour that the
draft comfort letter agreed on 15 and 16 January 2015 was in final form), these
important points of divergence between the draft letter agreed and the Avendus
letter as tendered by CT Power could not be regarded as falling within the limited
scope for modification of those terms as is referred to in that evidence: see
above. The Ministry of Finance was lawfully entitled to conclude that the
Avendus letter did not comply with the requirements which it had properly and
lawfully set out in the terms of the draft bank comfort letter agreed at the
meetings on 15 and 16 January 2015. Hence, so far as the substance of the
matter is concerned, the Ministry of Finance was entitled to take the view that
the Avendus letter did not constitute satisfactory proof of CT Power’s
financial capabilities for the duration of the project such as would satisfy
Condition 15.
51.
There is a further and more fundamental reason why the Ministry of
Finance was entitled to take the view in February/March 2015 that there was no
satisfactory proof of CT Power’s financial capabilities with respect to the
project. As noted by the Supreme Court at para 45, CT Power’s own case was that
the signing of the Implementation Agreement was critical to provide assurance
to those providing funding for CT Power for the project by way of debt and equity.
If the Government lawfully chose not to sign the Implementation Agreement,
there was no suggestion by CT Power that it could be said to be able to satisfy
Condition 15 in the early part of 2015. (Of course, for the reasons set out
above, the EIA licence continued to exist for the benefit of CT Power until
January 2016 and it was open to it to submit to the Ministry of Finance, at any
time up to the expiry of the licence, details of any improved financing
arrangements which it might be able to put in place, with a view to persuading
the Ministry that Condition 15 could be regarded as fulfilled: however, this
did not occur).
52.
Therefore, in the Board’s judgment, quite apart from the failure of the
Avendus letter to meet the requirements of the Ministry of Finance as set out
in the draft bank comfort letter which had been agreed, CT Power’s judicial
review claim against the Ministry of Finance cannot succeed as a matter of
substance unless CT Power’s separate judicial review claim against the Ministry
of Energy in respect of its refusal to sign the Implementation Agreement
succeeds. However, for the reasons given below, that claim fails.
53.
The basis for the Supreme Court’s ruling in the judicial review claim
against the Ministry of Finance with respect to Condition 15 was that it
considered that the Ministry had acted in breach of a legitimate expectation of
procedural fairness, citing R v North and East Devon Health Authority, Ex p
Coughlan [2001] QB 213, at para 57, and Attorney General of Hong Kong v
Ng Yuen Shiu [1983] 2 AC 629. According to the Court, CT Power had a
legitimate expectation to be consulted before the outright rejection of the
Avendus letter as a suitable letter of comfort and to be given the opportunity
to refute the reasons relied upon by the Ministry of Finance for rejecting it;
this legitimate expectation arose by reason of the meetings between CT Power
and the Ministry of Energy and the Ministry of Finance in January 2015, in
which both Ministries represented that they were in the process of resolving
how best Condition 15 would be satisfied by CT Power: para 56.
54.
To this procedural aspect of the case the Board now turns. In doing so,
the Board observes that at those meetings both Ministries appear to have
treated the question of satisfaction of Condition 15 as related to the question
whether the Government could be satisfied that CT Power was a financially
robust and credible counterparty for the project and the Implementation
Agreement. Therefore, it is appropriate to treat this procedural aspect of the
case as relevant both to CT Power’s claim against the Ministry of Finance and
to its claim against the Ministry of Energy with respect to the signing of the
Implementation Agreement, considered below.
55.
Mr Basset SC, for CT Power, accepts that in order to show that a
legitimate expectation has arisen it is necessary to identify a promise or
assurance by the relevant decision-maker which is “clear, unambiguous and
devoid of relevant qualification” (per Bingham LJ in R v Inland Revenue
Comrs, Ex p MFK Underwriting Agents Ltd [1990] 1 WLR 1545, 1569; approved
in R (Gaines-Cooper) v Inland Revenue Comrs [2011] UKSC 47; [2011] 1 WLR 2625, paras 28-29).
56.
For present purposes the Board is prepared to proceed on the basis that
at the meetings on 15 and 16 January 2015 the Ministry of Finance led CT Power
to expect that if it could provide the Ministry with a bank comfort letter in
the terms agreed at those meetings, that would satisfy the Ministry so far as
Condition 15 was concerned. However, as explained above, it was also recognised
that CT Power’s financing would be dependent on the Government entering into
the Implementation Agreement containing the guarantee of due payment for the
electricity to be supplied by the project. Therefore, any assurance given by
the Ministry of Finance regarding the acceptability of a bank comfort letter in
the terms of the draft agreed was known to be subject to the qualification that
the Ministry of Energy would need to sign or be prepared to sign the
Implementation Agreement.
57.
As regards the Implementation Agreement, in early 2015 the latest draft
version (from July 2014) was far from being in final form (it was replete with
drafting suggestions proposed by CT Power but not yet accepted by the Ministry
of Energy) and was in any event known to be subject to contract and without
legal effect until it came to be signed by the parties. The Ministry of Energy
gave no assurance to CT Power that it would sign any particular version of the
Implementation Agreement if CT Power provided a bank comfort letter in the form
of the draft agreed. Indeed, according to the terms of clause 7 of the draft
Implementation Agreement which CT Power was seeking to persuade the Ministry of
Energy to accept, CT Power was proposing that the Implementation Agreement
should be signed before it had to provide proof of its financial capabilities
to satisfy Condition 15 in the EIA licence.
58.
It may be that the assurance given by the Ministry of Finance referred
to above created a procedural legitimate expectation that the Ministry would
consider whether any bank comfort letter submitted by CT Power was in the form
of the draft bank comfort letter agreed at the meetings on 15 and 16 January
2015. The Ministry did consider whether the Avendus letter was in the form of the
draft bank comfort letter; accordingly, it complied with such a procedural
legitimate expectation, if there was one. However, there could be no question
of the Ministry being subject to any substantive legitimate expectation arising
out of what was said at the meetings on 15 and 16 January 2015 that it would
confirm that Condition 15 was satisfied when it received the Avendus letter,
both because the Ministry rationally and lawfully concluded that that letter
was not in the form of the draft which had been agreed and also because the
Ministry of Energy was not prepared to sign the Implementation Agreement
(whether in the draft then proposed by CT Power or in any other version).
59.
CT Power enjoyed no legitimate expectation to the kind relied upon by
the Supreme Court in its judgment. In the Attorney General of Hong Kong case,
the Board stated the relevant principle in relation to procedural legitimate
expectations as follows, at [1983] 2 AC 629, 638:
“… when a public
authority has promised to follow a certain procedure, it is in the interest of
good administration that it should act fairly and should implement its promise,
so long as implementation does not interfere with its statutory duty. The
principle is also justified by the further consideration that, when the promise
was made, the authority must have considered that it would be assisted in
discharging its duty fairly by any representations from interested parties and
as a general rule that is correct.”
60.
In the present case, however, neither the Ministry of Finance nor the
Ministry of Energy made any promise or gave any assurance that if CT Power
submitted a bank comfort letter which was not in the form agreed at the
meetings on 15 and 16 January it would be afforded an opportunity to make
representations as to why, notwithstanding its non-conformity with the agreed
draft, it should nonetheless be accepted by them.
61.
Further, contrary to the view of the Supreme Court (also at para 56 of
its judgment), fairness did not require that CT Power should be informed why
the Avendus letter did not comply with the agreed draft and “given an
opportunity to justify why in its view it did so”. The Ministry of Finance had
already discharged its obligation to treat CT Power fairly by inviting it to
the meetings on 15 and 16 January and giving it an opportunity to learn about
the Ministry’s requirements, to make representations itself and to agree the
form of the bank comfort letter to be provided. From this engagement, CT Power
knew precisely what form of bank comfort letter was required. Yet it failed to
provide one which complied with the terms agreed. There was no doubt about the
non-compliance of the Avendus letter with the agreed draft. The Ministry of
Finance was not subject to any obligation to give CT Power a second chance to
debate what form of comfort letter should be provided, nor to give CT Power an
opportunity to seek to persuade it that the non-compliant Avendus letter ought
to be enough.
The decision of the Ministry of Energy in relation to the
Implementation Agreement
62.
The Supreme Court identified the power of the Minister of Energy to
negotiate and enter into the Implementation Agreement as being derived from section
62 of the Constitution of Mauritius, which permits the assignment to a Minister
of “responsibility for the conduct (subject to this Constitution and any other
law) of any business of the Government, including responsibility for the
administration of any department of Government”. Although Mr Guthrie disputed
this, he did not identify any other source for the Minister’s power to make a
commercial contract on behalf of the Government. The Board sees no reason to
question this part of the Supreme Court’s analysis.
63.
The power of the Minister of Energy to undertake negotiations with CT
Power as part of the conduct of the business of the Government is a wide one,
conferring on the Minister a very wide discretion as to how best to proceed.
The implication is that the Minister is permitted to participate in the
commercial market in the usual way, ie through the exercise of the full
bargaining power available to the Government in order to secure the best
commercial deal possible and thereby promote the public interest. With that end
in view, a court should be astute to ensure that application of public law
standards in relation to the Minister does not cut down or undermine that
bargaining power. Nor should public law standards be applied in such a way as
to give a potential contracting counterparty a negotiating advantage which has
not been bargained for.
64.
In negotiating a commercial contract on behalf of the Government, the
Minister, as a public authority, is not entirely free from constraints arising
under public law. He is obliged to comply with basic public law standards which
ensure that he properly seeks to promote the public interest. Accordingly, his
decision-making as to how to conduct negotiations before a contract is entered
into might be brought into question if, by way of purely hypothetical example,
he acted out of personal spite or because he had been bribed. As a result, the
potential counterparty is not exposed to what, if they were negotiating with
another private party, might be the pure capriciousness of that private party
in deciding whether to enter into the contract and on what terms.
65.
However, when conducting negotiations, the Minister is entitled to have
regard to a wide range of considerations, including political considerations,
which would not typically play a role in negotiations between two private
commercial parties. In the present case, for example, entering into the
Implementation Agreement would involve a commitment potentially requiring
substantial payments of public money. There is inevitably a possible political
dimension to such questions which it would be legitimate to take into account.
In the present case it appears that the incoming government after the general
election in December 2014 may have been less convinced than the former
government that the project was a good idea and that the commitment to be given
in the Implementation Agreement was justified.
66.
For these reasons, in the present context the Board takes the
opportunity to reaffirm the guidance given by it in the Mercury Energy case,
at [1994] 1 WLR 521, 529A-B:
“It does not seem likely that a
decision by a state enterprise to enter into or determine a commercial contract
to supply goods or services will ever be the subject of judicial review in the
absence of fraud, corruption or bad faith.”
The limited scope for a judicial review challenge as indicated
in this passage reflects the width of the relevant discretion enjoyed by a
state enterprise (or, in the present case, the Minister of Energy) when
exercising its powers to negotiate a commercial contract or how to use its
rights under such a contract.
67.
There is no question in the present case of the decision of the Minister
of Energy not to finalise and sign the Implementation Agreement being affected
by fraud, corruption or bad faith. In the Board’s judgment, particularly in
light of the unsatisfactory nature of the Avendus letter, the Minister was
entitled simply to take the view that, all things considered, CT Power did not
appear to be a satisfactory contractual counterparty and that it was
undesirable for the Implementation Agreement to be entered into.
68.
The Board does not exclude the possibility that judicial review of the
Minister of Energy’s decision might be appropriate if his conduct had given
rise to a legitimate expectation on the part of CT Power as to how he would
proceed in relation to the Implementation Agreement. However, in the Board’s
view no such legitimate expectation arose.
69.
The Supreme Court held (para 46) that there was a legitimate expectation
that the Minister of Energy would adhere to clause 7 in the draft
Implementation Agreement, meaning that the Minister would sign the
Implementation Agreement first and allow CT Power to provide proof of its
financial capabilities within nine months thereafter. The Board disagrees. It
is not possible to spell out of clause 7 any promise or assurance by the
Minister which is “clear, unambiguous and devoid of relevant qualification”, as
would be required in order to give rise to a legitimate expectation. That is
both because (i) the text of clause 7 in the draft Implementation Agreement was
accompanied by the Note set out above which made it clear that it was being put
forward by CT Power in the “hope this is in line with the expectations of the
[Government]”, so it was not a promise or representation by the Minister at
all; and in any event, (ii) clause 7 was contained in a draft agreement which
was yet to be signed and hence was recognised by the parties as being subject
to contract, so it could not be regarded as a promise or assurance which was
“devoid of relevant qualification” (on the contrary, clause 7 was clearly a
statement made subject to a relevant qualification, namely that it would not be
binding until the Implementation Agreement was signed). In argument, Mr Basset
SC accepted that this was so.
70.
In the face of this difficulty, Mr Basset sought to argue that a
relevant promise or assurance by the Government could be spelled out of the
Note which accompanied the text of clause 7. However, this submission cannot be
sustained. The terms of the Note make it clear that it is written by the representatives
of CT Power and does not proceed from the Government at all. The Note does not
purport to set out any promise or assurance.
71.
Mr Basset submitted that the first sentence of the Note set out an
assurance by the Ministry of Finance, on behalf of the Government, that it
wished to have clause 7 included in the final version of the Implementation
Agreement. But in the Board’s view the sentence cannot be read as reflecting
any clear promise of the Ministry of Finance “devoid of relevant
qualification”, because (i) it is expressed in conditional terms (the sentence
simply recorded that the Ministry had said what should happen “if Condition 15
… is included in the Implementation Agreement”, but it was an open question
whether that would be agreed, rather than Condition 15 being treated as setting
out a requirement which had to be satisfied before the Implementation Agreement
was signed); and, again, (ii) clause 7 and the Note appeared in the text of an
agreement which was all subject to contract.
Conclusion
72.
For the reasons given above, the Board allows the appeal and quashes the
order made by the Supreme Court.
