Is possession of a contract nine-tenths of the law?
16 December 2020
In Solaria v Department for Business, the Court of Appeal held that a signed and part-performed commercial contract was, prima facie, a “possession” for the purpose of Article 1, Protocol 1 of the European Convention for the Protection of Human Rights. That a contract is assignable is not the legal test to apply, simply a factor.
Solaria, a supplier of solar panels, was seeking compensation from the UK Government because of its decision to end a scheme that supported small-scale electricity generation from renewable sources. In these proceedings, Solaria appealed against the High Court’s strike out of its claim against the Government for breach of its rights under Article 1. The grounds for strike out were that: (a) the contract was not a possession so could not fall under the ambit of Article 1; and (b) that the claim was issued five years after the limitation period expired.
The Court of Appeal stated that, whilst not all contracts are possessions within the meaning of Article 1, the starting point must be that all signed and part-performed commercial contracts are, prima facie, possessions. The High Court had said the contract could not be assigned and therefore was not a possession within the meaning of Article 1. The Court of Appeal disagreed.
Firstly, the contract could be assigned, it simply required prior consent which could not be unreasonably withheld. Secondly, the High Court was wrong to consider assignability as a black and white test for whether the contract was a possession under Article 1. The test is more nuanced than “if the contract is not assignable then it is not a possession”. Thirdly, even if the contract contained a complete bar on sub-letting or assignment, it would not mean that there was no Article 1 claim, as assignability is just one of the indications of a possession.
Unfortunately for Solaria, the appeal was nonetheless dismissed on the limitation point, as the judge had not erred in exercising his discretion determining it was not equitable to extend the limitation period.