JUDGMENT OF THE GENERAL COURT (Fourth Chamber)
8 November 2011 (*)
(Implementation of the budget – Recovery – Offsetting of amounts receivable – Retroactive effect – Judgment of the General Court ordering the Commission to pay damages and interest – Amount receivable to be certain, of a fixed amount and due)
In Case T‑37/08,
Robert Walton, residing in Oxford (United Kingdom), represented by D. Beard, Barrister,
applicant,
v
European Commission, represented by J. Currall, acting as Agent,
defendant,
ACTION for annulment of the Commission Decision of 16 November 2007 to recover by offsetting the sum of EUR 36 551.58 due to it by the applicant,
THE GENERAL COURT (Fourth Chamber),
composed of I. Pelikánová, President, K. Jürimäe and M. van der Woude (Rapporteur), Judges,
Registrar: K. Pocheć, Administrator,
having regard to the written procedure and further to the hearing on 23 March 2011,
gives the following
Judgment
Background to the dispute
1        This case concerns the Commission decision of 16 November 2007 to recover by offsetting, under Article 73 of Council Regulation (EC) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (OJ 2002 L 248, p. 1, ‘the Financial Regulation’), the sum of EUR 36 551.58 which was due to it by the applicant, Mr Robert Walton (‘the contested decision’).
1.     The sum owed by the applicant to the Community
2        The applicant was recruited by the Commission of the European Communities as a member of the temporary staff in October 1999 for a period of five years with a six-month probationary period.
3        By letter of 3 October 2000 the Commission informed the applicant that his contract would be terminated as from 16 October 2000. By letter of 22 November 2000 the Commission stated that the applicant owed the European Community the sum of EUR 13 104.14, due to the fact that he had received, in error, a salary for the months during which he had been absent. A debit note to this effect was sent to him on 24 January 2001.
4        The applicant challenged his dismissal by bringing an action before the Court of First Instance (now the General Court). In Case T‑155/01 Walton v Commission [2003] ECR‑SC I‑A‑121 and II‑595 the Court dismissed the application, holding that the applicant, by his conduct between the end of June and 9 August 2000, had himself terminated his contract of employment.
5        For that reason, the Commission considered that it was not obliged to compensate the applicant for his dismissal. By letter of 23 October 2003 it thus sought reimbursement of the compensation for dismissal, namely the sum of EUR 13 815.16, together with interest as from 11 January 2004, that it had paid to him when his contract of employment was terminated. A debit note for the recovery of that amount from the applicant was issued on 27 November 2003.
6        On 27 May 2005 the Commission adopted, pursuant to Article 72 of the Financial Regulation, a decision which was enforceable, in accordance with Article 256 EC, in respect of a sum of EUR 26 919.30 (being the sums of EUR 13 104.14 and EUR 13 815.16 added together), plus interest as at 31 March 2005 of EUR 4 813.26 (with the addition of EUR 5.06 per day thereafter) (‘the enforced recovery decision’).
7        The applicant did not appeal against the enforced recovery decision.
2.     The sum owed by the Community to the applicant
8        The applicant was a member of a group of individuals who were initially employees of third party contractors working for the Joint European Torus (JET) Joint Undertaking, which was responsible for conducting the ‘Fusion’ programme which provided for the construction, operation and exploitation of a large torus facility of the Tokamak type and its auxiliary facilities (‘the JET project’) and were then in October 1999 recruited as temporary servants by the Commission. Ruling on an action for damages brought by that group (in judgment of 5 October 2004 in Case T‑144/02 Eagle and Others v Commission [2004] ECR II‑3381 and I‑A‑275 and II‑1231, ‘the Eagle interlocutory judgment’), the General Court held that, by failing to offer to those individuals contracts as temporary servants in order to perform their duties within the JET, contrary to the JET Statutes, the Commission had committed a wrongful act such as to give rise to the liability of the European Community.
9        In the Eagle interlocutory judgment, paragraph 8 above, the Court also held that the Commission’s wrongful act had resulted in the loss, to the individuals concerned, of a genuine chance of being recruited as temporary servants and had given rise to financial loss resulting from the difference between the salaries and benefits which the individuals concerned would have received or acquired if they had worked for the JET project as temporary servants and the salaries and benefits which they had actually received or acquired as employees of outside companies.
10      The Court stated, at paragraph 171 of the Eagle interlocutory judgment, paragraph 8 above, that the compensation period commenced on the effective date of the earliest contract concluded or renewed within the period of five years prior to the submission of the claim for compensation and ended either on the date on which the individual concerned stopped working for the JET project, if that was before the end of the project on 31 December 1999, or on that date if he had worked for the JET project until its conclusion.
11      In the Eagle interlocutory judgment, paragraph 8 above, the Court ordered the Commission to pay compensation for the financial loss sustained by each of the applicants in that case, including Mr Walton, as a result of the fact that they had not been recruited as temporary servants of the Commission during the time they had worked on the JET project. Furthermore, the Court ordered the parties to produce to it an agreement on the quantum of damages due in reparation of the said loss. In the absence of agreement, they were to put before the Court their submissions on the quantum of damages.
12      No agreement having been reached, on 28 October 2005 the parties sent to the Court their submissions on the quantum of damages. By judgment of 12 July 2007 in Case T‑144/02 Eagle and Others v Commission [2007] ECR II‑2721, the Court ordered the Commission to pay to each of the applicants damages corresponding to the sum indicated for each of them in Annex 3 to that judgment. The Court also held that that sum would bear interest at the rate of 5.25% as from 31 December 1999 until actual payment.
13      Annex 3 to the Eagle and Others v Commission judgment, paragraph 12 above, provides that the damages payable to the applicant, as at 31 December 1999, amounted to GBP 208 021.
3.     Offsetting debts
14      The Commission referred for the first time, in an annex to its submissions on the quantum of damages of 28 October 2005, lodged in the damages quantification proceedings relating to the Eagle and Others v Commission judgment, paragraph 12 above, to the issue of a potential set-off between the damages that it might owe to the applicant by virtue of the forthcoming judgment and the amount which it claimed was receivable by the Community from the party concerned. On 21 December 2005 the applicant sent an email to the Commission requesting clarification with regard to this possible set-off. The Commission replied to this request by letter of 22 December 2005.
15      In their quantum submissions of 19 February 2007, the applicants in the case which gave rise to the Eagle and Others v Commission judgment, paragraph 12 above, disputed that it was open to the Commission to offset sums receivable by the Community from the applicant against the sums that were payable to him.
16      Following those further quantum submissions, the Commission stated that it was not maintaining its claim that the Court should rule on the issue of a potential set‑off in the context of the case which gave rise to the Eagle and Others v Commission judgment, paragraph 12 above. The Court took formal note of this statement at paragraph 19 of the Eagle and Others v Commission judgment, paragraph 12 above.
17      Following the Eagle and Others v Commission judgment, the applicant wrote to the Commission on 19 July 2007 requesting it to confirm that the calculation of the amounts payable to the applicants was correct. The Commission responded, by email of 31 July 2007, that it accepted those figures, though stating that it had a reservation regarding the calculation of daily interest.
18      The Commission indicated, by letter of 24 September 2007, that it intended to effect a set-off in respect of the amount payable to the applicant. In his response by letter of 25 October 2007 the applicant maintained that the Commission was not entitled to effect such a set-off. In its reply by letter of 25 October 2007, the Commission refused to accept the applicant’s position.
19      By letter of 9 November 2007, received by the applicant on 13 November 2007, the Commission indicated that it would carry out a set‑off and that it would deduct the sum of EUR 36 551.58 owed to it by the applicant from the sum of EUR 421 749.73 that the Community owed to him. The amount of EUR 36 551.58 was made up of a sum of EUR 13 104.14, referred to in the debit note of 24 January 2001, and a sum of EUR 13 815.16, referred to in the debit note of 27 November 2003, together with interest on those sums amounting to EUR 9 632.28. It is apparent from the Annex to the letter of 9 November 2007 that that interest covers the period from the due date of each of those debit notes until 8 November 2007. The amount of EUR 421 749.73 corresponded to the damages of GBP 208 021, together with interest.
20      On 16 November 2007 the Commission adopted the contested decision and paid the applicant a total of EUR 385 198.15 (that is, the sum of EUR 421 749.73 minus the sum of EUR 36 551.58).
Procedure and forms of order sought
21      The applicant brought the present action by application lodged at the Registry of the General Court on 23 January 2008.
22      The applicant claims in essence that the Court should:
–        annul the contested decision;
–        order the Commission to pay the costs.
23      The Commission contends that the Court should:
–        dismiss the action as inadmissible or, in the alternative, as unfounded; and;
–        order the applicant to pay the costs.
Law
1.     Admissibility
24      The Commission maintains that there is no challengeable act in the present case. The offsetting is simply the consequence of an earlier judgment and an earlier decision which have become final. The offsetting is therefore not a challengeable act, and therefore, the action is inadmissible.
25      It must be borne in mind that an act whereby the Commission effects an out‑of‑court set-off between debts and claims arising from different legal relationships with the same person is a challengeable act for the purposes of Article 230 EC (see, to that effect, Case C‑87/01 P Commission v CCRE [2003] ECR I‑7617, paragraph 45) and in the context of such an action for annulment it is for the Court to examine the legality of a decision to offset in the light of the effects of the failure actually to pay the contested sums to the applicant (see, to that effect, the judgment of 8 October 2008 in Case T‑122/06 Helkon Media v Commission, not published in the ECR, paragraph 46, and the judgment of 8 July 2009 in Case T‑182/08 Commission v Atlantic Energy, not published in the ECR, paragraph 70).
26      Since, in the present case, the Commission has effected an out-of-court set-off, the action brought against the contested decision is admissible. Consequently, the Commission’s objection that the action is inadmissible must be rejected.
2.     Substance
27      The applicant relies on four pleas in law in support of the form of order sought. The first is that there was abuse of process. The second is that there was a breach of the principle of protection of legitimate expectations. The third is that errors affected the legal basis for the set-off. The fourth is that there were errors in the calculation of the amount to be offset because interest for late payment was taken into account.
The first plea in law: abuse of process
28      The applicant claims that it is inappropriate and unfair for the Commission to carry out an out-of-court set-off, when it could have raised the issue of set-off before the Community courts. Set-off was an issue which should have been raised and examined at an earlier stage of the proceedings. It cannot be accepted that the Commission should evade adversarial proceedings and judicial scrutiny, by acting in a belated and unilateral manner, after delivery of the Eagle and Others v Commission judgment, paragraph 12 above.
29      The applicant considers that, in proceedings relating to actions for damages, the issue of set‑off constitutes, at least under English law, a form of defence that must be properly pleaded before the competent court. Otherwise, the sums being pursued and potentially awarded by a court may be reduced or indeed eliminated.
30      First, it must be observed that the contested decision is a decision for recovery by offsetting taken under Article 73 of the Financial Regulation and Article 83 of Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of the Financial Regulation, as amended by Commission Regulation (EC, Euratom) No 1248/2006 of 7 August 2006 (OJ 2006 L 227, p. 3, ‘the Implementing Rules’).
31      Next, it is clear that the procedure laid down by the Financial Regulation leading to the adoption of a decision for recovery of a receivable amount by offsetting does not provide that the Commission must first assert before a court its intention to offset amounts receivable.
32      Article 73(1) of the Financial Regulation provides that the accounting officer is to recover by offsetting amounts, duly established by the authorising officer responsible, receivable by the Communities from any debtor when that debtor himself/herself has a claim on the Communities that is certain, of a fixed amount and due.
33      Further, Article 71 of the Financial Regulation provides that the responsible authorising officer must, first, establish that an amount is receivable, namely verify that the debts owed by the debtor exist, determine or verify the reality and the amount of the debt and verify the conditions in which the debt is due. Article 79 of the Implementing Rules requires the authorising officer to ensure, inter alia, that the amount receivable is ‘certain’, and not subject to any condition. The authorising officer is also bound to ensure that the amount receivable is ‘of fixed amount’, expressed precisely in cash terms, and that it is ‘due’, namely not subject to any payment time. In addition, Article 80 of the Implementing Rules provides that any establishment of an amount receivable is to be based on supporting documents justifying the Communities’ entitlement.
34      Under Article 71(2) of the Financial Regulation, any amount receivable that is identified as being ‘certain, of a fixed amount and due’ must be established by a recovery order to the accounting officer, drawn up by the authorising officer responsible. Further, under Article 78(2) of the Implementing Rules, the recovery order is the operation by which the authorising officer instructs the accounting officer to recover the established amount receivable.
35      The Commission is therefore correct in its submission that it was not obliged to refer to the set-off as a form of defence within the proceedings relating to the case which gave rise to the Eagle and Others v Commission judgment, paragraph 12 above.
36      It must further be observed that, by deciding to effect recovery by offsetting under Article 73 of the Financial Regulation, the Commission in no way encroached on the applicant’s procedural rights. The applicant had three ways of asserting his procedural rights. First, it was open to the applicant to bring an appeal against the Walton v Commission judgment, paragraph 4 above, in order to challenge the finding that by his conduct he had terminated his employment contract. Secondly, it was open to him to contest the enforced recovery decision. Thirdly, he could bring an action for annulment of the Commission’s decision of 16 November 2007 to recover by offsetting the sum of EUR 36 551.58 owed to it by the applicant (see paragraph 25 above), as he has done in the present action.
37      Consequently, the applicant cannot justifiably accuse the Commission of having evaded any judicial scrutiny of the legality of offsetting the amounts receivable.
38      In the light of the foregoing, the Commission did not commit any ‘abuse of process’. The first plea must therefore be rejected as unfounded.
The second plea in law: breach of the principle of the protection of legitimate expectations
39      The applicant claims that the Commission caused him to have the legitimate expectation that the Commission would pay to him in full the sums set out in the table in the email of 31 July 2007 (see paragraph 17 above).
40      It must be recalled that, in accordance with settled case-law, the right to rely on the principle of the protection of legitimate expectations extends to any individual in a situation where a Community authority has caused him to entertain expectations which are justified. As a general rule, a person may not plead infringement of the principle unless he has been given precise assurances by the administration (judgment of 24 November 2005 in Case C‑506/03 Germany v Commission, not published in the ECR, paragraph 58; Joined Cases C‑182/03 and C‑217/03 Belgium and Forum 187 v Commission [2006] ECR I‑5479, paragraph 147, and Joined Cases T‑346/99 to T‑348/99 Diputación Foral de Álava and Others v Commission [2002] ECR II‑4259, paragraph 93).
41      In the present case, at no time did the Commission give precise assurances that it would not offset amounts receivable. Its email of 31 July 2007, to which the applicant refers, contains no promise or assurance to that effect. That email concerned solely the correctness of the calculations, applicable to all of the applicants in the proceedings which gave rise to the Eagle and Others v Commission judgment, paragraph 12 above. The email made no reference to the specific circumstances of the dispute between the Commission and the applicant and is silent on how amounts receivable by the Community might be recovered. The email in question could not therefore cause the applicant to have the legitimate expectation that the Commission would not effect a set-off.
42      The same is true of the statement made by the Commission following the further submissions as to the quantum of damages in the proceedings which gave rise to the Eagle and Others v Commission judgment, paragraph 12 above. By that statement, of which the Court took formal note in paragraph 19 of that judgment, the Commission made clear that it was withdrawing the issue of set-off which it had raised in the course of those proceedings and that there was no need for the Court to rule on that point. Such a statement does not however mean that the Commission had abandoned its right to effect recovery by offsetting the amount receivable by the Community from the applicant, outside those proceedings.
43      The applicant has therefore not identified any precise assurance or promise which could have caused him to have a legitimate expectation that the Commission would not effect recovery by offsetting. Consequently, the second plea must be rejected as unfounded.
The third plea in law: errors affecting the legal basis of the set-off
44      The applicant challenges the legality of the set-off of amounts receivable carried out by the Commission. As regards the Commission’s debit note of 24 January 2001, he maintains that that debit note precedes the Walton v Commission judgment, paragraph 4 above, and is based on the premiss of a dismissal. Further, he claims that, since the Court held that the decision to dismiss him was of no effect, that decision cannot have served as the basis for the issue of a debit note. He concludes that the Commission’s debit note of 24 January 2001 is invalid and of no effect.
45      The applicant claims, in the alternative, that the Commission’s debit note of 24 January 2001 was not preceded by a decision establishing the amount receivable, within the meaning of Article 71 of the Financial Regulation, with the result that the conditions for offsetting, within the meaning of Article 73 of the Financial Regulation, were not met.
46      As regards the Commission’s debit note of 27 November 2003, the applicant claims that that debit note cannot serve as a legal basis for offsetting, because he did not have access to the two file notes to which that debit note refers. The Commission’s refusal to provide him with those file notes is also contrary to the provisions of Article 60(4) of the Financial Regulation, read in conjunction with Articles 48, 49 and 80 of the Implementing Rules. The applicant then claims that that error of law requires the cancellation of the amount receivable, in accordance with Article 88 of the Implementing Rules.
47      Essentially, therefore, the applicant disputes the existence of the receivable amounts which the Commission used in the offsetting.
48      In that regard, it is clear that the amounts at issue are to be found both in the Commission’s debit notes of 24 January 2001 and 27 November 2003 and in the enforced recovery decision.
49      However, there is no need to determine whether either the Commission’s debit notes of 24 January 2001 and 27 November 2003 or the enforced recovery decision are challengeable acts under Article 230 EC, because it is clear, in any event, that the applicant did not bring any action for annulment of those measures within the period of two months prescribed by that article.
50      In those circumstances, it must be held that the applicant cannot, within the present action, dispute the amounts receivable which are the basis for the Commission’s debit notes of 24 January 2001 and 27 November 2003 and the enforced recovery decision.
51      Consequently, the third plea must be rejected as being inadmissible.
The fourth plea in law: errors in the calculation of the amount to be offset as regards interest
52      The applicant calls into question the manner in which the Commission effected the set-off, in relation to the taking into account of interest for late payment. In his opinion, such a set-off should have been effected on the dates on which the amounts which he allegedly owed to the Commission became due, without taking into account interest for late payment.
53      The applicant claims that, according to the Eagle and Others v Commission judgment, paragraph 12 above, the principal sum which the Commission owed him should have been paid by 31 December 1999 at the latest. After that date, interest for late payment at the rate of 5.25% was payable to him. The amounts receivable by the Community from him arose subsequently, on the dates when the two debit notes fell due, namely 31 March 2001 and 11 January 2004. The Commission should therefore have effected the set-off in two stages. He considers that the Commission should, first, have offset the amount of EUR 13 104.14 which he owed to the Community against the amount which the Community owed him on 31 March 2001 and, secondly, have offset the amount of EUR 13 815.16 which he owed to the Community against the amounts which it still owed him on 11 January 2004.
54      In that regard, the applicant claims that the Commission did not proceed in this way, when offsetting the total amounts which included interest for late payment. He maintains that the Commission thereby caused the amounts receivable from him by the Community to grow at a higher rate of interest than that on the amount receivable by him from the Community, since the interest rates claimed by the Commission were greater than those laid down in the Eagle and Others v Commission judgment, paragraph 12 above. The Commission thus had a financial interest in prolonging the recovery procedure.
55      By this plea in law, the applicant submits, in essence, that the amount receivable by him from the Community precedes the amount receivable by the Community from him and that the set-off must have a retroactive effect. In his opinion, the effect of offsetting is to extinguish the receivable amounts, from the point in time when the conditions to effect set-off are met.
56      The Commission considers that the amounts receivable by the Community from the applicant were certain and of a fixed amount before the amount receivable by the applicant. The amounts which the applicant owed to the Community were known in 2000. The Commission considers that the amounts receivable by the Community from the applicant became certain and of a fixed amount as from August 2005 at the latest, when the period for bringing an action against the enforced recovery decision expired. On the other hand, the amount due by the Community to the applicant was known only in July 2007. The fact that the amount awarded to the applicant contains interest calculated from 31 December 1999 is irrelevant, because the total amount of interest could not be calculated before the principal amount was known.
57      First, it must be recalled that the conditions under which recovery by offsetting a receivable amount can be effected and the appropriate procedure are determined by the Financial Regulation and the Implementing Rules referred to above (see paragraphs 30 to 34 above).
58      It is apparent from the second subparagraph of Article 73(1) of the Financial Regulation and Articles 79 and 83 of the Implementing Rules that, before offsetting is possible, the reciprocal amounts receivable by the European Union and by the other party must be (i) certain, which means that they are not subject to any condition, (ii) of a fixed amount, which means that their amount must be expressed precisely in cash terms and (iii) due, which means that they are not subject to any payment time.
59      The Court must therefore determine when those conditions were met in respect of each of the amounts receivable which are at issue in this case.
60      As regards the amount receivable by the Community from the applicant, it is common ground that the Commission sent an initial debit note on 24 January 2001 and a second note on 27 November 2003 and that the applicant did not make payment of the sums requested within the periods set in those notes, which ended respectively on 31 March 2001 and 11 January 2004. The amount receivable by the Community was therefore, in any event, certain, of a fixed amount and due on the expiry of those periods.
61      As regards the amount receivable by the applicant from the Community, it must be observed, first, that that amount receivable consists of the damages which the Commission was ordered to pay to the applicant by the Eagle interlocutory judgment, paragraph 8 above, in which the Court held that the conditions under which the Community would incur liability to the applicant were satisfied. It must next be recalled that, when that interlocutory judgment was delivered, the Court was not in a position to determine the amount of damages payable to the applicant and that the proceedings had to be continued in order to determine the exact amount. Lastly, that amount was known only on the date of delivery of the Eagle and Others v Commission judgment, paragraph 12 above, on 12 July 2007. It follows that the amount receivable by the applicant from the Community became of a fixed amount only on that date.
62      In those circumstances, while it is true that the operative part of that judgment does not fix the amount payable by the Community at that date, to the extent that it allows interest to run until the actual payment of damages, the fact remains that the amount receivable by the applicant from the Community became certain, of a fixed amount and due on 12 July 2007.
63      Consequently, the applicant’s claim that the amount receivable by him preceded the amounts receivable by the Community from him must be rejected.
64      Secondly, notwithstanding the absence of any express provision to that effect, it must be held that the offsetting provided for by the Financial Regulation is retroactive in effect, as claimed by the applicant, with the result that it extinguishes the amounts receivable concerned as from the time when the conditions governing its operation are met.
65      Under the system established by Article 73 of the Financial Regulation and Article 83 of the Implementing Rules, the accounting officer must effect the offsetting after informing the debtor of it, where the debtor has not voluntarily complied.
66      The retroactive effect of offsetting to the date when the obligation of the accounting officer materialises thereby ensures, in accordance with the systems of offsetting recognised by the legal systems of the majority of Member States, that the debtor does not suffer any adverse consequences, in particular as regards interest for late payment payable when a period of time elapses between the time when the conditions for offsetting are met and the time when the offsetting is actually carried out.
67      In the present case, the Commission did not carry out the offsetting with effect from 12 July 2007, the date on which the conditions imposed by Article 73 of the Financial Regulation for offsetting were satisfied, but on 8 November 2007, the day before the sending of the letter of 9 November 2007. It is clear from the Annex to that letter that the amounts offset included interest incurred subsequent to 12 July 2007.
68      Consequently, the Commission infringed Article 73 of the Financial Regulation, as interpreted in paragraphs 64 to 65 above. The fourth plea in law must therefore be partly upheld and, accordingly, the contested decision must be annulled, to the extent that it includes in the amounts offset sums representing interest incurred after 12 July 2007.
Costs
69      Under Article 87(3) of the Rules of Procedure, where each party succeeds on some and fails on other heads, the Court may order that the costs be shared or that each party bear its own costs.
70      Since the action has been partly upheld, it will be fair in the circumstances of the case that each party bear its own costs.
On those grounds,
THE GENERAL COURT (Fourth Chamber)
hereby:
1.      Annuls the Commission decision of 16 November 2007 to the extent that it includes interest incurred after 12 July 2007 in the amounts offset;
2.      Orders each party to bear its own costs.
Pelikánová
Jürimäe
Van der Woude
Delivered in open court in Luxembourg on 8 November 2011.
[Signatures]
*Language of the case: English.