Although government told RHI claimants that the subsidies were set in stone for 20 years, boiler owners should have realised that there was the possibility of change, a government lawyer has told Belfast High Court.
Despite the fact that the RHI subsidy levels were set out in statute, were actively promoted by multiple arms of government and that users in many cases took on huge loans on that basis, Tony McGleenan QC effectively said that the users – many of whom are farmers – should have been more careful in accepting at face value what they were told.
He said the fact that the tariffs – which government described at the time as “certain”, “guaranteed”, “reliable” and “long-term” – were contained in secondary, rather than primary, legislation should have alerted claimants to the possibility that the tariffs could be changed.
Referring to the applicants’ contention that they had a “substantive legitimate expectation” of the payments continuing, Mr McGleenan, who is Stormont’s voice in the courtroom, accepted that the department had given a “commitment” that the tariffs would be ‘grandfathered’ [a legal term indicating that the tariffs were exempt from future change].
But he went on to argue that the fact the tariffs were in the form of regulations rather than an act of the Assembly “would have signalled [to the claimants] that the regulations are always amenable to change” and that it “couldn’t be construed as a commitment to make mistaken payments”.
Asked by the judge, Mr McGleenan clarified that the possibility of such a change extended to any other piece of secondary legislation.
The QC argued that the applicants, a group of boiler owners attempting to overturn the retrospective regulations which slashed their payments, were actually complaining about what was in the regulations because they couldn’t sustain a complaint that the department was in breach of the Energy Act – the legislation under which the regulations were made – due to the fact that it gave broad scope to the department to make regulations.
Mr Justice Colton put it to counsel for the department that although the government can change some laws, such as taxes, at short notice, unlike the RHI claimants there is never any suggestion that taxpayers will face the same rate of tax for 20 years.
The judge went on to ask Mr McGleenan whether the department was saying that all government regulations made under a wide power “are such that those impacted by them should be aware of the caveat here to be aware that they could be changed?”.
Mr McGleenan responded: “Yes. The issue then is whether [the change] is fair.”
He later said that it did not matter whether the regulations were retrospective in application but that “what matters here is whether what is happening here is so unfair that Parliament could never have intended it”.
He said it was for the judge to decide “whether we have acted unfairly or disproportionately” but that there was no blanket prohibition on retrospective law.
Mr McGleenan also said that no one could have had a reasonable expectation of a rate of return on their investment of up between 70% and 100%.
And he said that even if the court ruled that there was something “akin to a contract” which had given such a reasonable expectation then it had to decide whether it had been “an abuse of power” by the Assembly to break that promise.
Mr McGleenan, who described the RHI project as “a visibly dysfunctional scheme”, said that the changes had been made for the right reason – “to protect the public purse” and to correct design flaws in the scheme, adding: “That’s nowhere near an abuse of power.”
Moy Park ‘taking payments’
The court was also told that a poultry farmer who is one of the applicants in the case was not able to keep all of the income from his RHI subsidy.
Mr McGleenan referred to an affidavit from the man and said that he was “put under pressure by his customer, Moy Park, who require a portion of the subsidy to be paid directly to them”. Referring to that issue, Mr McGleenan said the suggestion was “concerning”.
The judge asked whether in the absence of an Executive the commitment given by the department in January to consult about a long-term replacement to the one-year retrospective regulations before they expire next March could be kept. Mr McGleenan said that was “going to be difficult” and that it “may well be that there will be some recourse to Westminster in those circumstances ... there are contingency plans.”
Foster’s letter on ‘providing certainty’ raised
Yesterday the High Court was yet again brought to a key letter from Arlene Foster in which she set out a categoric guarantee that RHI tariffs would not be changed.
The then enterprise minister’s January 2013 letter to the banks urged them to lend money for the scheme and said that “tariffs are ‘grandfathered’ providing certainty for investors by setting a guaranteed support level for projects for their lifetime in a scheme, regardless of future reviews” and that the subsidy was “reliable, long term and offers a good return on investment”.
Responding for the boiler owners, Gerry Simpson QC said: “The applicant’s case, at its heart, remains that the tariff was grandfathered to provide the certainty referred to in the [departmental] documentation ... the 2012 [regulations] participants entered into significant financial liabilities ... based on the 2012 regulations.”
He said that it was the department which had chosen the precise nature of the scheme, the department which “chose to extol the benefits and virtues of grandfathering” and its then minister, Arlene Foster, who wrote to the banks to urge them to lend to individuals – some of whom he is representing – based on the certainty of the tariffs.
He set out five departmental documents in which it used words such as “certainty”, “confidence”, “guaranteed” and “consistent”.
He added: “If anybody had any doubt about those unequivocal statements, one has the regulations themselves.” The regulations, he said, were described to encourage people to make financial investments “in the sure and certain knowledge” that the tariffs were permanent.
He said that if the department believed that it had the legal power to alter the tariffs at any point then “their representations were, at the very least, fundamentally misleading”.
And he took issue with what he described as “an undertone that there was abuse”, saying: “If people are misusing the scheme there is a very clear mechanism to remove them from the scheme ... still nothing seems to have happened ... [but] you cannot arbitrarily remove someone from the scheme.”
At the close of the case, the judge reserved his judgment, saying that he would deliver it as soon as he could.